================================================================================

                      SECURITIES AND EXCHANGE COMMISSION 
                            WASHINGTON, D.C. 20549 
                                  FORM 10-K 
   FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE 
                       SECURITIES EXCHANGE ACT OF 1934 
(Mark One) 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
    SECURITIES EXCHANGE ACT OF 1934 
                 For the fiscal year ended December 31, 1996 
                                      or 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
    SECURITIES ACT OF 1934 [No Fee Required] 
      For the transition period from                   to 
                           Commission File No. 0-21519 
               INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC. 
             (Exact name of registrant as specified in its charter) 

<TABLE>
<CAPTION>
<S>                                           <C>
            Delaware 
  (State or other jurisdiction of                        06-1295986 
  incorporation or organization)              (I.R.S. Employer Identification No.) 

       225 High Ridge Road, 
       Stamford, Connecticut                                06905 
  (Address of principal executive offices)               (Zip Code) 
</TABLE>

     (203) 329-3300 (Registrant's telephone number, including area code) 
       Securities registered pursuant to Section 12(b) of the Act: None 
         Securities registered pursuant to Section 12(g) of the Act: 

                    Common Stock, $.01 par value per share 
                               (Title of Class) 

   Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days. Yes [X] No [ ] 


   Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K (Section 229.405 of this Chapter) is not contained 
herein, and will not be contained, to the best of registrant's knowledge, in 
definitive proxy or information statements incorporated by reference in Part 
III of this Form 10-K or any amendment to the Form 10-K. [X]



   The aggregate market value of voting Common Stock held by nonaffiliates of 
the registrant as of February 26, 1997: 



   Common Stock, $.01 par value -- $90,710,240.63 



   The number of shares outstanding of the issuer's common stock as of 
February 26, 1997: 



   Common Stock, $.01 par value -- 8,436,941 shares 


                               -----------------
                     DOCUMENTS INCORPORATED BY REFERENCE 


Portions of the Proxy Statement relating to the Annual Meeting of 
Stockholders to be held April 8, 1997 are incorporated by reference into Part 
III of this Report. 
================================================================================



<PAGE> 


Item 1--Business 


   ITDS is a leading provider of comprehensive transactional billing and 
management information solutions to providers of wireless, long distance and 
satellite telecommunications services. The Company uses its robust and 
flexible proprietary software technology to develop billing solutions which 
address customer requirements as they evolve, regardless of the market 
segment, geographic area or mix of network features and billing options. The 
Company provides its services to customers under exclusive contracts with 
terms typically ranging from three to four years, and bills customers 
monthly, typically on a per-subscriber basis. As a result, substantially all 
of the Company's revenue is recurring in nature, and increases as a 
provider's subscriber base grows. 

   In recent years, the telecommunications services industry has experienced 
rapid growth and dramatic change, ranging from the introduction of such new 
technologies as cellular, PCS and satellite communications, to new features 
and services, in a wide variety of combinations and at a great diversity of 
prices. The Company's systems are designed to respond to the dynamic 
requirements of this market for cost-effective transactional billing 
solutions by drawing on the Company's core technology, which does not require 
significant reconfiguration or customization to be applied across market 
segments, geographic areas and customer types. The Company's software 
currently supports both of the two predominant cellular telecommunications 
protocols, Advanced Mobil Phone Systems ("AMPS"), an analog service 
predominant in the U.S., and the Global System for Mobile Communication 
("GSM"), an international digital service, as well as other emerging digital 
standards. 

   The Company's advanced billing and management information system, ITDS 
10X, forms the foundation for its integrated suite of applications that 
provide not only subscriber billing and service support, but also the means 
to automate subscriber activation, remittance processing, collections, data 
retrieval and reporting, electronic funds transfer, credit management, 
inventory management and data archiving. Its modular system architecture 
permits providers to draw on those features and functions most appropriate to 
their specific requirements in a fully-integrated software solution. The 
Company's software and services allow its customers to address the demands of 
a rapidly evolving marketplace by enabling them to develop and support 
innovative rate and feature offerings without the delay and cost associated 
with reconfiguring their billing and information systems; to identify and 
respond to subscriber demands through analysis of billing and subscriber 
databases; to reduce costs with accurate and timely receivables information; 
and to manage the subscriber relationship in a comprehensive and cost- 
effective manner. 


Industry Background 



  General 
   The U.S. telecommunications industry currently generates approximately 
$208 billion in annual revenue and has experienced rapid change and greatly 
increased competition in recent years. Deregulation and rapid technological 
advances are resulting in convergence of previously separate segments of the 
telecommunications market. Markets that were once rigidly segmented by 
service within geographical areas are converging into a single, world-wide 
communications market, which includes both traditional service providers and 
a variety of new participants. Each segment of these converging markets is 
experiencing significant growth, increased complexity in service offerings 
and greater competition. 



   Rapidly evolving technical changes have dramatically increased the 
features and services available to subscribers. These changes have ranged 
from the evolution of entirely new communications media, such as satellite 
transmission, to innovative services, such as PCS, to a rapidly evolving and 
growing range of services and features. For example, many cellular providers 
are now offering such innovative features as group ringing, which initiates a 
call on all of an individual's lines (whether business, personal or mobile) 
and connects the call as soon as one line is answered, and cell site 
sensitive billing, which, for example, enables carriers to apply local 
wireline rates for calls to or from a cellular telephone within the vicinity 
of the subscriber's home or business and apply cellular rates elsewhere. 
Improved switching technology is permitting local exchange telecommunications 
services providers to offer a variety of new features and services to their 
subscribers such as call delivery beyond the subscriber's home area, call 
waiting, voice mail and others. 


                                       1
<PAGE> 

   Internationally, privatization and deregulation are resulting in similar 
increases in competition, the emergence of newly authorized 
telecommunications providers, and the provision of additional features over a 
variety of media. 


  Wireless Communications 
   The Cellular Telecommunications Industry Association ("CTIA") estimates 
that the number of cellular subscribers in the United States increased from 
500,000 in June 1986 to 38.2 million in June 1996. In the twelve months ended 
June 1996, cellular providers generated more than $21 billion in revenue in 
the United States, while in 1995, paging providers generated approximately $4 
billion in revenue from approximately 34 million subscribers. In addition to 
growth in the cellular telephone market, the emergence of new wireless 
communications technologies and services, such as PCS and satellite-based 
telephony, is expected to increase the quality and capabilities of wireless 
communications, including, to varying degrees, seamless roaming, increased 
service coverage, improved signal quality and greater data transmission 
capacity. 



  Other Segments 
   Other segments of the telecommunications services industry are 
experiencing similar change and convergence. Wireline providers, including 
providers of local, long-distance, network access and related services, 
provide services to approximately 155 million customers in the U.S., 
generating more than $163 billion in 1995. Deregulation has spurred the 
creation of new entrants in both the local and long distance market and has 
increased competitive pricing pressures among all providers. Regional Bell 
Operating Companies (RBOCs) and long-distance providers compete with 
providers of wireless services through the purchase of cellular companies and 
PCS licenses, while wireline providers are pursuing opportunities in the 
cable market. At the same time, utility companies are leveraging their 
existing electrical and fiber optic infrastructures to provide 
telecommunications services to their customers. In addition, on-line service 
providers, including companies such as Prodigy, America Online and 
CompuServe, have generated a large and rapidly growing market for the 
provision of a range of services including electronic mail, news, and other 
information, as well as home shopping and access to the Internet. 



  Traditional Transactional Billing 
   Transactional billing is the process of matching specific calling events 
with a subscriber database. Historically, this was primarily a billing 
process, used in order to generate invoices for wireless, long- distance and 
local service by individual and business users. In light of the competitive 
and price pressures faced by service providers, and the proliferation of 
service features and pricing options within the telecommunications services 
industry, the billing function is continuing to evolve from primarily a 
service support function to a marketing and revenue enhancement device used 
to differentiate the increasingly fungible services offered by providers. 
Transactional billing is becoming an increasingly significant interface with 
the subscriber, and is therefore a critical element of attracting, 
communicating with, and retaining customers. 


   Many telecommunications services providers in the U.S. have traditionally 
used transactional billing systems developed internally or through 
cooperative joint ventures for operation on a provider's mainframe computer. 
These "legacy" systems typically are difficult to maintain and modify, and 
often do not meet the multiple and evolving needs of a service provider. In 
legacy systems, introduction of changes in parameters such as price and 
service often requires significant reconfiguration or reprogramming. These 
traditional means of billing and monitoring service have proven inadequate to 
respond to the evolving and dynamic requirements of the telecommunications 
services marketplace. The enormous growth in the number of subscribers, and 
the proliferation and range of services offered, require highly capable, 
flexible and scalable support systems, which can adequately support the size 
and nature of customer offerings on a cost effective basis. 


   Other service providers have elected to out-source billing and management 
information-related functions because of the significant level of 
technological expertise and capital resources required to implement systems 
successfully. In addition, many emerging telecommunications services 
providers lack any transactional billing infrastructure at all. One of the 
primary challenges that these newer service 


                                       2
<PAGE> 

providers face is to bring new services to market quickly. They typically 
focus their capital resources on developing networking and switching 
technology and on creating marketable services rather than on creating 
billing systems. These providers typically seek to outsource the billing 
functions because efficient flexible billing solutions are often too costly 
and time consuming to develop internally. 


The ITDS Solution 



   The Company's solution is based upon an integrated software system that 
not only provides reliable and accurate transactional billing and management 
information support, but also includes the means to automate subscriber 
activation, remittance processing, collections, data retrieval and reporting, 
electronic funds transfer, credit management, automation of inventory 
management, and data archiving on a fully-integrated basis, running in either 
single or multiple telecommunications services markets, including cellular, 
paging, long distance and satellite. In comparison with traditional 
solutions, the Company's software and services: 



   (bullet) permit providers to develop, validate, implement and support rate 
            changes without the corresponding requirement to develop or 
            change support systems, reducing the time to introduce new 
            marketing or sales strategies; 



   (bullet) permit providers to introduce new features or combinations of 
            features, either directly or with others, on a timely basis; 



   (bullet) assure that providers have immediate access to multiple databases 
            on a fully-integrated basis, to improve marketing and sales 
            planning; 



   (bullet) deliver accurate, timely and useful billing information to 
            customers, regardless of mix or change in level of service and 
            rates, to facilitate customer attraction and retention; and 



   (bullet) improve providers' cash flows and reduce bad debt by detecting 
            fraud and delivering accurate and timely receivable and 
            collection information across systems and service offerings. 



The ITDS Strategy 


   The Company's goal is to become a leading provider of integrated 
transactional billing and management information products and services to the 
converging telecommunications services industry in the United States and 
internationally. Key elements of its strategy include: 


   (bullet) Expand Sales to Wireless Services Providers. To date, the Company 
            has built a significant customer base among smaller and mid-sized 
            wireless providers. The Company intends to build upon this base 
            by adding additional wireless services providers, including 
            providers of PCS and satellite services, as well as larger 
            telecommunications services providers. 



   (bullet) Leverage Technology Features to Address Requirements of Related 
            Market Segments. The Company believes it is well positioned to 
            leverage its technology base by offering transactional billing 
            and management information solutions to providers in such other 
            telecommunications services market segments as wireline and data 
            transmission, Internet and other enhanced services. Expansion 
            into these additional sources of potential revenue will not 
            require commensurate investment in software development because 
            the Company's existing core technology already meets the more 
            challenging and demanding requirements of the wireless segment of 
            the market. 



   (bullet) Expand International Operations. In February 1997, the Company, 
            through its subsidiary ITDS LTDA, a Brazilian limitada, agreed to 
            provide billing services to MCOMCAST, S.A., a Brazilian limitada 
            owned by COMCAST International Holdings, Inc. and MCOM Wireless, 
            S.A. ITDS LTDA will establish a service bureau operation in Sao 
            Paulo, Brazil from which it will provide billing services and 
            support. The Company intends to pursue additional international 
            opportunities by leveraging relationships with domestic customers 
            that may be expanding overseas, by seeking strategic 
            international partners, and by selling directly abroad. 



   (bullet) Leverage Employee Experience. The Company intends to leverage its 
            employees' expertise in providing support and services to its 
            customers to retain its existing customers and expand its 
            customer base. 


                                       3
<PAGE> 


   (bullet) Expand Direct Sales and Develop Strategic Relationships. The 
            Company has recently begun to expand its sales force and is 
            seeking to create additional strategic distribution and marketing 
            alliances and to enter new markets, through relationships with 
            hardware vendors and equipment providers. 



Recent Developments 



   Since the Company's initial public offering in October 1996, the Company 
has relocated and consolidated its corporate headquarters; introduced the 
next release of the ITDS 10X system; hired additional employees, increasing 
its sales and marketing team and adding a key member of management; increased 
sales and marketing efforts to larger service providers; and expanded its 
subscriber base. In November 1996, the Company relocated its corporate 
headquarters and consolidated each of its Connecticut offices into 48,222 
square feet of office space in Stamford, Connecticut. The new facility's 
state-of-the-art data center has enhanced the Company's technical development 
and support and training capabilities, enabling the Company to provide more 
complex services and meet the needs of a larger customer base. Beginning in 
October 1996, the Company has provided its new customers with, and converted 
certain of its existing customers to, its new version 4.0 of the ITDS 10X 
system. Version 4.0 includes more flexible, table-driven rating capabilities 
and other improved functionality. Between the Company's initial public 
offering and February 15, 1997, the number of Company employees has increased 
from 175 to 188. In November 1996, Joseph Juliano joined the Company as 
Executive Vice President of Strategic Product Management. Mr. Juliano, who 
has over 13 years of experience in the wireless transactional billing 
industry, is responsible for the direction and development of products and 
services, assisting the Company's sales and marketing efforts and providing 
the Company's customers with expert advice in the rapidly changing wireless 
industries. Since the initial public offering, the Company has entered the 
PCS market and added several customers, including Cellular Properties, Inc., 
PCS One, Inc. and MCOMCAST, S.A. and has renewed its existing contracts with 
Dobson Cellular Systems and Columbia River Cellular L.P. 


Products and Services 

  Core System 
   The Company provides its customers with integrated transactional billing 
and management information solutions through the installation of its software 
systems and the provision of billing services. The Company's software is 
installed at a customer site to interface directly with the customer's 
systems and generate relevant subscriber billing and other data, as well as 
to support a wide range of transactional billing and subscriber management 
functions. The Company processes the billing information through the use of 
its software, eliminating the need for customers to maintain their own 
"back-office" data processing operation. Customers contract for the use of 
the Company's software and the provision of the Company's services on a 
long-term exclusive basis, generally between three and four years, and are 
billed monthly on a per-subscriber basis. 


    The Company's suite of ITDS integrated applications allows customers the
flexibility of rapidly changing their billing services to implement, for
example, immediate rate plan changes for access, toll usage or toll discounts
without the need for programming. Drawing on its client/server architecture, the
system can be integrated with a customer's other communication and data systems
to provide customers with the ability to generate up-to-date subscriber analysis
and reports. The ITDS 10X system does not require any customer dedicated
circuits, and customers can maintain the system along with rate tables and
subscriber databases on their local network, while utilizing the system to
interface with external databases and systems as appropriate. To further assure
its operational flexibility and usefulness, the system supports key industry
standards such as the CIBER standard for the wireless clearinghouse for AMPS,
CDMA and TDMA wireless systems in the U.S. and the TAP standard for
international clearinghouse for GSM cellular systems. The Company also
interfaces with major U.S. credit bureaus, the Federal Reserve system and
various U.S. banks for electronic funds transfer and credit card transactions.
The ITDS 10X system includes a complete library of billing and financial reports
for production as part of the month-end billing process. These reports provide
customers with critical transactional billing data and can be modified or
configured by customers to respond most appropriately to their specific
information requirements.


   The ITDS 10X system performs each of the following transactional billing, 
subscriber management and information functions, while updating the relevant 
customer database on a real-time basis: 


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<PAGE> 


   On-Line Subscriber Care and Management Support--Provides end-to-end 
support for all subscriber interface requirements: 

<TABLE>
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<S>                                    <C>
 Subscriber Order Entry                Credit Bureau Interface 
Integrated Point of Sale               Transactional Credit Card Billing 
Phone Number Assignment                Rate & Feature Assignment 
Switch Provisioning Interface          Equipment Inventory Assignment & Tracking 
Lead Generation & Tracking             Multiple Account Receivable Options 
Automatic Clearinghouse for Bank 
  Draft Payments                       Automatic Call Credit Adjustments 
Multi-tiered Security Systems          On-Line What-if Plan Selection 
Automatic Notes and Reminders          Multiple Search Keys at Account or Phone Level 
</TABLE>

   Message Processing and Rating--Includes the collection of raw call detail 
records from the customer's switch network, and the editing, formatting, 
rating and guiding of all traffic events necessary to produce subscriber 
invoices, traffic reports and other call related information: 


<TABLE>
<CAPTION>
<S>                                           <C>
Data Collection from all Switch Types         Polling or Receipt of Near Real Time Records 
Roamer In/Out Collect Processing              Up to 999 Rate Plans per Market 
Error Management & Reporting                  Rating, Re-rating and "Pseudo Roaming" Support 
Discounts by Amount or Percentage             Variable Time Periods for Air and/or Toll 
Selective or Global Exceptions                Unlimited Toll Plans On-line 
</TABLE>

   Billing & Invoicing--Application of rated messages to invoices, summary 
files and reports: 


<TABLE>
<CAPTION>
<S>                                   <C>
Multiple Bill Cycles by Market        FIFO Overdue Payment Application 
Balance Forward Billing               Invoice Format Options 
Multiple Level Invoices               Global, Group or Individual Messages 
Full Lockbox Support                  Federal Reserve Bank Interface 
Currency Conversion                   Language Options 
International Addressing              Print Fulfillment Options 
</TABLE>


   Although customers can perform their own on-site cycle-end rating and bill 
processing by licensing the Company's batch billing software, most customers 
elect to contract with the Company to perform those functions for them at the 
Company's data center. Customers transmit call detail records from their 
switching network or network provider directly to the Company's data center. 
In addition, the Company can extract necessary data from the customer's file 
server. The Company formats, guides, rates, and taxes the call records in 
accordance with the appropriate subscriber parameters and produces print 
image data output and various reports. The Company's bill verification 
personnel provide an additional level of assurance that subscriber invoices 
and management reports are accurate and timely. The Company then arranges 
with third-party vendors for the printing and distribution of subscriber 
invoices on a monthly basis. 


   In addition to the foregoing general features, the ITDS system 
incorporates a modular system architecture which can support a number of 
complementary applications to meet a customer's specific requirements, 
including: 


   (bullet) ITDS SwitchLink: ITDS SwitchLink is a direct multi-switch 
            interface between ITDS 10X and all types of telecommunication 
            switches, including cellular, wireline, paging and voice mail 


                                       5
<PAGE> 

            platforms. SwitchLink manages line and feature activation or 
            deactivation in connection with ITDS 10X service order activity. 


   (bullet) ITDS CreditLink: ITDS CreditLink interfaces with several 
            U.S.-based credit bureaus to provide on- line credit analysis of 
            potential subscribers. 



   (bullet) ITDS Collections Module: The ITDS Collections module provides 
            support for dedicated collections personnel. 



   (bullet) ITDS PayScan: ITDS PayScan is an automated lockbox remittance 
            processing system that uses an easily installed scanning device 
            to create edited, balanced batches that may be transferred to 
            ITDS 10X payment files. 



   (bullet) ITDS InventoryScan: ITDS InventoryScan is a complete inventory 
            management system which allows easy bar code scanning and on-line 
            inventory record maintenance from the physical receipt of 
            equipment to entry into the ITDS inventory subsystem. 



   (bullet) ITDS Report Writer: The ITDS Report Writer allows real-time data 
            from different sources within the system to be used to create 
            customized ad hoc subscriber reports. 



  New Products and Enhancements 
   The Company continues to refine its existing software and to introduce new 
enhancements to meet evolving customer requirements. Enhancements currently 
under development include incorporation into the ITDS 10X system of a Windows 
95-compatible user interface and an Oracle relational database management 
system; debit/threshold billing; and provision for the ITDS 10X system to 
operate with UNIX- based file servers, in order to address the needs of 
larger customers on a scalable and interoperable basis. 



  Point of Sale System 
   In addition to the ITDS 10X system and related products, the Company 
offers a point of sale package (the "ITDS Point of Sale System"), a highly 
capable sales tool designed to incorporate the entire sales process into a 
quick and convenient on-line function. The system can be used in-store or as 
a mobile unit, so that customers can market wireless products and services 
outside of traditional store settings. The system enables sales clerks to 
quickly process initial service applications, on-line credit checks, 
inventory updates, assignment of telephone numbers, rate plan selection, 
invoicing and payments. Upon credit verification, the system immediately 
creates an entry in the customer's subscriber database and can activate 
telephone service at the switch. In addition, because complete access to the 
entire ITDS 10X database is available, walk up inquiries and account payments 
from existing subscribers can be handled immediately. 


   The ITDS Point of Sale System is made available to users as a complete 
package. An intelligent workstation, color monitor, hand held inventory 
scanner, and full size cash drawer are installed as an integrated part of the 
ITDS 10X database. All information, including categorized sales figures and 
updated inventory stock levels, entered into the ITDS Point of Sale System is 
available for immediate reporting and analysis. 


Customer Support 


   The Company provides support from the time a customer converts to the 
Company's software and continuing through the on-going provision of 
transactional billing services. The Company assigns to each new customer a 
dedicated conversion team that specializes in facilitating the transition 
onto the ITDS 10X system by applying an implementation methodology which 
includes study of the customer's needs, definition of relevant conversion 
requirements, and on-site installation and training. This is followed up by 
systematic analysis of the implementation process, live conversion and 
follow-up training as required to meet the customer's requirements. 


   Thereafter, the Company assigns a support team including a customer 
service representative and a programmer/analyst for on-going support of the 
customer's requirements, including implementation 


                                       6
<PAGE> 

of additional functionality if requested by the customer. In addition, the 
Company provides a fully-staffed customer service department and 24-hour, 7 
day a week access to customer service representatives. 

   The Company's service and support activities are supplemented by the 
provision of on-going training classes to customers, free of charge, to 
assist customers in utilizing the system capabilities more effectively. 
Typically, the Company schedules two to three such classes a month addressing 
different aspects of the transactional billing and management information 
service process. 

   In January 1997, the Company's customer service and support department 
consisted of 33 persons, with an additional 13 dedicated quality assurance 
employees. 


Sales and Marketing 


   The Company's strategy has been to establish and maintain long-term 
customer relationships. As customers' subscriber bases grow and as customers 
add systems features to their existing ITDS 10X systems, the Company 
generates increased revenue. The Company's customer support programs enable 
it to understand customer needs and offer strategic solutions from its suite 
of integrated products and features. In addition, the flexible and scalable 
architecture of the ITDS 10X core technology enables the Company to maintain 
customer relationships as customers enter into additional telecommunications 
markets. 


   The Company's customers include Aliant Communications Co., COMSAT Mobile 
Communications, Dobson Cellular Systems, France Caraibes Mobiles (formerly, 
France Telecom FCR), HighwayMaster Corporation, MCOMCAST, S.A., Point 
Communications Company, Sygnet Communications and TRICOM, SA. For the year 
ended December 31, 1996, revenue from Aliant Communications Co. (formerly, 
The Lincoln Telephone and Telegraph Company) and its affiliated companies 
represented approximately 19.1% (reflects the acquisition of Nebraska 
Cellular by Aliant in 1996) of the Company's total revenue, and revenue from 
Horizon Cellular Group represented approximately 12.5% of the Company's total 
revenue. The Company has long-term contracts with all of its significant 
customers, however, there can be no assurance that any such customer will 
renew its contract with the Company at the end of the contract term or may 
not seek to terminate its contract on the basis of alleged contractual 
defaults or other grounds. Loss of all or a significant part of the business 
of any of the Company's substantial customers would have a material adverse 
effect on the Company's business, financial condition and results of 
operations. Since October 1996, Horizon Cellular Group has divested certain 
of its remaining cellular markets, the majority of which were acquired by 
existing customers of the Company. Because the majority of these markets were 
acquired by the Company's existing customers, the Company does not expect 
that the significant reduction in revenue from Horizon Cellular Group 
expected in 1997 will have a material adverse effect on the business, 
financial condition or results of operations of the Company. 



   Although historically, the Company has achieved substantial growth with a 
core marketing team of senior executives, the Company has recently begun to 
expand its sales and marketing group as part of its overall strategy to add 
additional wireless providers as customers and to expand the sales of its 
systems in other segments of the telecommunications markets. The Company has 
begun to develop strategic alliances with hardware and telecommunication 
equipment product vendors, in order to expand into new markets. For example, 
the Company works with Hewlett-Packard to develop software systems compatible 
with Hewlett-Packard hardware. The Company also serves as a reseller of 
Hewlett-Packard equipment configured for the Company's software system. In 
addition, the Company has begun to seek strategic international partners that 
will enable the Company to gain access to distribution systems and 
complementary product offerings and to facilitate the Company's international 
growth. The Company intends to continue to focus on the development of such 
alliances as international deregulation and technological changes increase 
demand for viable, flexible and interoperable transactional billing and 
management information systems. The Company's marketing efforts also include 
providing marketing newsletters to its customers, advertising and 
participating in industry trade shows, seminar lectures, and industry 
standards meetings. 


                                       7
<PAGE> 


System Development 



   The Company's research and development efforts are focused on enhancing 
existing products and services as well as developing products, features and 
services that can be integrated into the Company's core ITDS 10X technology. 
The Company's product development team reviews product and service 
development proposals and establishes internal guidelines for efficient 
development. The Company's research and development team also works closely 
with customers to perform customization of products to meet specific needs. 
In addition to internal development, the Company works with its strategic 
partners Hewlett-Packard and Oracle to develop products compatible with their 
product offerings. Currently, the Company has a number of new enhancements 
under development to meet evolving customer requirements, including 
incorporation into the ITDS 10X system of a Windows 95 compatible user 
interface and an Oracle relational database management system; 
debit/threshold billing; and provision for the ITDS 10X system to operate 
with Unix based file servers. 


   The Company actively participates in industry standards associations to 
assure that its development efforts are in compliance with standards as they 
evolve and to assure that the Company's software can be used on a fully open 
and interoperable basis. For example, the Company works closely with a 
variety of standards committees and working groups of CIBERNET, the standards 
body of the Cellular Telephone Industry Association ("CTIA"). The Company 
participates in the CIBERNET Advisory Committee, which evaluates proposed 
changes to standards for wireless industry data exchange; the CIBERNET Net 
Settlement Working Group, which evaluates proposed changes to the subscriber 
net settlement process; and the CIBERNET Data Message Handler Working Group, 
which focuses on billing aspects of the TIA IS-124 standard. In addition, the 
Company participates in CTIA's International Forum for AMPS Standard, and the 
Bellcore Ordering and Billing Forum. 


   In the years ended December 31, 1994, 1995 and 1996, the Company incurred 
cash expenditures of $1,043,989, $1,662,457 and $2,974,132 respectively, on 
systems development, of which $288,602, $479,316 and $858,827, respectively, 
were capitalized as software development costs in each of such years. In 
January 1997, the Company employed 86 people in product and systems 
programming and development. 



Competition 


   The market for billing and management information systems for the 
telecommunications service industry is highly competitive and the Company 
expects that the high level of growth within the telecommunications service 
industry will encourage new entrants, both domestically and internationally, 
in the future. The Company competes with both independent providers of 
transactional systems and services and with internal billing departments of 
telecommunications services providers. The Company believes its most 
significant competitors in the wireless telecommunications segment are Alltel 
Information Systems, Inc., Cincinnati Bell Information Systems, Inc. 
("CBIS"), Computer Sciences Corp. and Electronic Data Systems, Inc. In the 
future, the Company may compete in both the wireless and wireline markets 
with additional companies who currently compete in market segments other than 
wireless. In addition, the Company competes with several international 
providers of billing and management information systems and, as the Company 
continues to expand into international markets, it will compete with 
additional providers abroad. 

   The Company believes that principal competitive factors include the 
ability to provide timely products, features and services that are responsive 
to evolving customer needs in an industry characterized by rapidly changing 
technologies and ongoing deregulation. The Company must provide statement 
accuracy, meet billing cycle deadlines, offer competitive pricing and 
maintain high product and service quality. The Company believes that its 
fully integrated architecture enables it to compete favorably in the 
telecommunications services industry by offering its customers a high degree 
of flexibility to quickly modify their billing and management systems as 
their needs and the needs of their subscribers change. 


   In addition, the Company believes that its ability to compete successfully 
will depend in part on a number of factors outside its control, including the 
development by others of software that is competitive with the Company's 
products and services, the price at which others offer comparable products 
and 


                                       8
<PAGE> 

services, the extent of competitors' responsiveness to customer needs and the 
ability of the Company's competitors to hire, retain and motivate key 
personnel. Many of the Company's current and potential future competitors 
have significantly greater financial, technical and marketing resources, 
generate higher revenue and have greater name recognition than does the 
Company. In addition, many of the Company's competitors have established 
commercial relationships or joint ventures with major cellular and other 
telecommunications services providers. 


Proprietary Rights and Licenses 


   The Company relies in part on trademark, copyright and trade secret laws 
to protect its proprietary rights. The Company distributes its products under 
service and software license agreements which typically grant customers 
non-exclusive licenses, subject to terms and conditions prohibiting 
unauthorized reproduction, transfer or use. The Company believes that because 
of the rapid pace of technological change in the telecommunications and 
software industries, the technological expertise of its personnel, the 
complexity of its system architecture and the frequency and timeliness of 
product and service offerings are more significant than the legal protections 
of its products. In addition, the Company enters into non-disclosure 
agreements with each employee and consultant and each third-party to whom the 
Company provides proprietary information. Access to the Company's core source 
code is greatly restricted. 


   The Company licenses from third parties technology that is important to 
certain functionalities of its products. The Company is not aware of any 
patent infringement or any violation of other proprietary rights claimed by 
any third party relating to the Company or the Company's products. 



Employees 



   In February 1997, the Company had a total of 188 employees, of whom 33 
were engaged in customer service, 86 were engaged in systems programming and 
development, 13 in quality assurance, 29 in new customer conversions, 5 in 
sales and marketing and 22 in administration and training. None of the 
Company's employees are represented by labor unions. The Company believes 
that its employee relations are good. 



Item 2--Properties 

   The Company subleases a 48,222 square foot facility in Stamford, 
Connecticut for its corporate headquarters, systems and programming, client 
service, operations, quality assurance, documentation and training, and 
administration. The Company maintains satellite offices in College Station, 
Texas, Champaign, Illinois, and Orlando, Florida for individuals engaged in 
product management and sales. 

Item 3--Legal Proceedings 

   The Company is not a party to any material legal proceedings. 

Item 4--Submission of Matters to a Vote of Security Holders 

   Not applicable. 

Executive Officers of the Registrant 

   The following table sets forth the names, ages and positions of all 
executive officers of the Company. 

<TABLE>
<CAPTION>
       Name          Age                              Position 
 ------------------  --------------------------------------------------------------------- 
<S>                  <C>  <C>
Charles L. Bakes      66  President, Chief Executive Officer and Director 
Mark D. Spitzer       47  Executive Vice President, Chief Financial Officer, Treasurer and 
                          Director 
Lewis D. Bakes        39  Executive Vice President, Chief Operating Officer, Secretary and 
                          Director 
Barry K. Lewis        41  Senior Vice President of Customer Services 
Joseph A. Juliano     47  Executive Vice President of Strategic Product Management 
</TABLE>

   Charles L. Bakes co-founded the Company in 1990 and has served as the 
Company's President and a director since that time. In 1983, Mr. C. Bakes 
co-founded the Clinton Financial Group, Inc., a broker/dealer specializing in 
the marketing of private placement equity investments, where he served as a 
Vice President until 1990. 

                                       9
<PAGE> 

   Mark D. Spitzer co-founded the Company in 1990 and has served as Executive 
Vice President, Chief Financial Officer and a director since that time. In 
1983, Mr. Spitzer co-founded the Clinton Financial Group, Inc. along with Mr. 
C. Bakes and served as its President until joining the Company. From 1983 to 
1990, Mr. Spitzer also served as a principal of The Clinton Companies, an 
investor and developer of commercial and residential properties. 

   Lewis D. Bakes co-founded the Company in 1990 and has served as Executive 
Vice President, Chief Operating Officer and a director since that time. Mr. 
L. Bakes served as an attorney at the law firm of Kleban & Samor P.C. from 
1984 until 1987, and served as General Counsel to The Clinton Companies from 
1987 to 1990. 

   Barry K. Lewis joined the Company in 1994, serving initially as the 
Company's Vice President of the Wireless Division and later as the Senior 
Vice President of Customer Services. From 1983 until he joined the Company, 
Mr. Lewis worked for Auxton Computer Enterprise and CBIS, wireless software 
billing vendors, ultimately serving as CBIS' Director of the Wireless 
Division. 

   Joseph A. Juliano joined the Company in November 1996 and has served as 
Executive Vice President of Strategic Product Management since that time. Mr. 
Juliano has been involved with the wireless industry since 1983. He served as 
Industry Consultant-Wireless Strategies at GTE TSI, a service provider for 
wireless carriers, from December 1995 to October 1996 and as Director 
Industry Matters for SNET Cellular from 1983 until 1995. In recent years, Mr. 
Juliano has been a participant in a number of industry advisory boards, 
including the CIBERNET Advisory Committee, CIBERNET DMH Working Group, CTIA 
Roamer Committee, CTIA Fraud Task Force (including as Chairperson of the 
Fraud Technology Working Group), and CTIA Authentication Working Group. In 
addition, Mr. Juliano is a Certified Management Accountant. 


   Charles L. Bakes is the father of Lewis D. Bakes. 

                                   PART II 

Item 5--Market for Registrant's Common Stock and Related Stockholder Matters 

   Price Range of Common Stock 

   The Common Stock has been quoted on the Nasdaq National Market under the 
symbol "ITDS" since the Initial Public Offering on October 24, 1996. 

   The following table sets forth the high and low sale prices of the Common 
Stock on the Nasdaq National Market for the periods indicated. 

<TABLE>
<CAPTION>
                                              High   Low 
                                             ------ ------ 
<S>                                         <C>     <C>
Fiscal Year Ended December 31, 1996: 
Fourth Quarter (from October 24, 1996)      $24-1/2 $15 
Fiscal Year Ending December 31, 1997: 
First Quarter (through February 26, 1997)   $24     $20-1/2 
</TABLE>


   On February 26, 1997, the last reported sale price for the Common Stock as 
reported by the Nasdaq National Market was $22.875 per share. As of February 
26, 1997, there were approximately 94 holders of record of the Common Stock. 


   Dividend Policy 

   In 1995 and 1996, the Company paid cash dividends to the holders of Class 
A Preferred Stock in the aggregate amounts of $33,750 and $36,000, 
respectively, and in 1994, it paid cash dividends of $46,080 to the holders 
of Class C Convertible Preferred Stock. The Company currently intends to 
retain earnings, if any, to support the development of its business and does 
not anticipate paying cash dividends for the foreseeable future. Payment of 
future dividends, if any, will be at the discretion of the Company's Board of 
Directors after taking into account various factors, including the Company's 

                                       10
<PAGE> 

earnings, financial condition, operating results and current and anticipated 
cash needs as well as such economic conditions as the Board of Directors may 
deem relevant. 

  Recent Sales of Unregistered Securities 
   Set forth in chronological order below is information regarding the number 
of shares of Common Stock and Preferred Stock issued by the Registrant since 
January 1, 1994. Also included is the consideration, if any, received by the 
Registrant for such shares, and information relating to the section of the 
Securities Act of 1933, as amended (the "Securities Act"), or rule of the 
Securities and Exchange Commission under which exemption from registration 
was claimed. No sale of securities involved the use of an underwriter and no 
commissions were paid in connection with the sales of any securities. The 
following descriptions give effect to the Recapitalization. 

   On September 27, 1996 as part of the Company's recapitalization, (i) all 
of the Company's Series A Preferred Stock was converted into an aggregate of 
524,808 shares of Common Sock and promissory notes in the aggregate amount of 
$450,000 and (ii) all of the Company's Series B Preferred Stock was converted 
into an aggregate of 328,004 shares of Common Stock and promissory notes in 
the aggregate amount of $375,000. 

   Upon the consummation of the Company's initial public offering of Common 
Stock in October 1996, 129 shares of Class C Convertible Preferred Stock held 
by Connecticut Innovations Incorporated converted into an aggregate of 
103,200 shares of Common Stock. 


   On January 1, 1997, the Company loaned to Mr. Juliano, an executive 
officer of the Company, a promissory note in the principal amount of $54,000 
due and payable on November 2, 1998, at an interest rate of 8.5%, secured by 
a pledge of 24,000 shares of Common Stock held by Mr. Juliano. 


   The shares of capital stock and securities issued in the above 
transactions were offered and sold in reliance upon the exemption from 
registration under Section 4(2) of the Securities Act or Regulation D or Rule 
701 promulgated under the Securities Act, relative to sales by an issuer not 
involving a public offering. 


                                       11
<PAGE> 


Item 6--Selected Financial Data 



                           SELECTED FINANCIAL DATA 
                    (in thousands, except per share data) 



   The following selected financial information with respect to the Company's 
statements of operations for the years ended December 31, 1993, 1994, 1995 
and 1996 and with respect to the Company's balance sheets as of December 31, 
1993, 1994, 1995 and 1996 have been derived from the Company's Financial 
Statements, which have been audited by Ernst & Young LLP, independent 
auditors, and, except for the statements of operations for the year ended 
December 31, 1993 and the balance sheets as of December 31, 1993 and 1994, 
appear elsewhere in this Prospectus. The selected financial information with 
respect to the Company's statements of operations for the year ended December 
31, 1992 and with respect to the Company's balance sheet as of December 31, 
1992 has been derived from the Company's unaudited financial statements. This 
information should be read in conjunction with "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" and the Company's 
Financial Statements and Notes thereto included elsewhere in this report. 


<TABLE>
<CAPTION>
                                                               Year Ended December 31, 
                                                  -------------------------------------------------- 
                                                    1992      1993      1994      1995       1996 
                                                   -------- --------  --------  --------- ---------- 
<S>                                               <C>       <C>       <C>       <C>       <C>
Statements of Operations Data: 
Revenue                                            $1,646    $3,146    $6,324   $10,821    $16,689 
Costs and expenses: 
 Operating expenses                                   568       834     1,647     2,788      4,283 
 General, administrative and selling expenses       1,218     1,575     2,410     4,601      6,523 
 Depreciation and amortization                        114       242       406       641      1,054 
 Systems development and programming  costs             6       298       755     1,183      2,115 
                                                   -------- --------  --------  --------- ---------- 
Total cost and expenses                             1,906     2,949     5,218     9,213     13,975 
                                                   -------- --------  --------  --------- ---------- 
Operating income (loss)                              (260)      197     1,106     1,608      2,714 
Other income                                            5        50        29        49        316 
Interest expense                                     (210)     (329)     (390)     (453)      (416) 
                                                   -------- --------  --------  --------- ---------- 
Income (loss) before income tax expense and 
  extraordinary item                                 (465)      (82)      745     1,204      2,614 
Income tax expense                                     --        --        37       378      1,112 
                                                   -------- --------  --------  --------- ---------- 
Income (loss) before extraordinary item              (465)      (82)      708       826      1,502 
Extraordinary loss (net of $158 tax benefit)           --        --        --      (224)        -- 
                                                   -------- --------  --------  --------- ---------- 
Net income (loss)                                  $ (465)   $  (82)   $  708   $   602    $ 1,502 
                                                   ======== ========  ========  ========= ========== 
Per common share data (1): 
Pro forma income before extraordinary item                                      $   .13    $   .23 
Extraordinary loss                                                                 (.03)        -- 
                                                                                --------- ---------- 

Pro forma net income                                                            $   .10    $   .23 
                                                                                ========= ========== 
Shares used in computing pro forma income per 
  common share                                                                    6,194      6,593 
                                                                                ========= ========== 
</TABLE>

                                       12
<PAGE> 

<TABLE>
<CAPTION>
                                                         December 31, 
                                         -------------------------------------------- 
                                          1992     1993    1994     1995      1996 
                                         -------  ------- -------  -------- --------- 
<S>                                      <C>      <C>     <C>      <C>      <C>
Balance Sheet Data: 
Cash, cash equivalent and 
  short-term investments                 $   308  $   457 $   512  $1,468    $ 4,487 
Securities available for sale at 
  estimated market value                     --       --      --       --     25,023 
Working capital                             243      164     157    1,210     31,639 
Current assets                              671      971   1,457    3,117     33,942 
Current liabilities                         429      807   1,300    1,907      2,303 
Total assets                              1,193    1,917   2,651    5,434     38,398 
Total long-term debt and 
  capital lease obligations               1,055    1,501   1,353    2,437        878 
Redeemable Preferred Stock--Class C          --       --      --      640         -- 
Total stockholders' equity (deficit)       (310)    (503)   (186)     379     34,717 
</TABLE>


(1) Computed on the basis described in Note 1 of Notes to Financial 
    Statements. 


                                       13
<PAGE> 


Item 7--Management's Discussion and Analysis of Financial Condition and 
Results of Operations 



                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS 



Overview 


   The Company is a leading provider of comprehensive transactional billing 
and management information solutions to providers of wireless, long distance 
and satellite telecommunications services. The Company uses its robust and 
flexible proprietary software technology to develop transactional billing and 
management information solutions for its customers under exclusive contracts 
with terms typically ranging from three to four years. 

   The Company derives revenue (i) primarily from service contracts, whereby 
a customer contracts with the Company to install, operate and maintain its 
transactional billing system and (ii) to a lesser extent, from the 
development of new software and enhancement of existing installed systems 
together with the provision of related customer maintenance and training, 
which is largely billed on a time and materials basis. Service revenue 
related to the operation of customers billing systems accounted for 93.5%, 
97.4% and 96.6% of total revenue for 1994, 1995 and 1996, respectively. 
Services are generally billed monthly and service revenue is recognized in 
the period in which the services are provided. 

   License fees comprise the remainder of the Company's revenue and are 
largely recognized upon execution of the licensing agreement and delivery of 
the software to the customer, provided that the Company has no significant 
related obligations or collection uncertainties remaining. Where there are 
significant obligations related to the development and enhancement of the 
software, license fees are recorded over the expected installation period or 
the term of the respective contract. As a result, the amount of revenue 
realized by the Company from license fees in a particular period depends 
largely on the number of product installations during that period, and the 
extent to which any significant obligations are outstanding. 

   Driven by the requirements of the telecommunications services market, the 
Company's revenue has grown rapidly in recent years, increasing from 
approximately $6.3 million in 1994 to $10.8 million and $16.7 million in 1995 
and 1996, respectively. 

   Operating expenses are comprised primarily of the salaries and benefits of 
technical service representatives, operations personnel and quality assurance 
representatives and costs to produce and distribute invoices for customers. 

   General, administrative and selling expenses consist mainly of the 
salaries and benefits of management and administrative personnel and general 
office administration expenses (rent and occupancy, telephone and other 
office supply costs) of the Company. 

   Systems development and programming costs are comprised of the salaries 
and benefits of the employees involved in internal software development. 
Prior to 1993, Company software was under development and all related costs 
were expensed. In 1993, the Company began to capitalize certain software 
development costs in accordance with Statement of Financial Accounting 
Standards (SFAS) No. 86. Amounts capitalized are amortized over five years. 


   This Annual Report on Form 10-K contains forward-looking statements. For 
this purpose, any statements contained herein that are not statements of 
historical fact may be deemed to be forward- looking statements. Without 
limiting the foregoing, the words "believes," "anticipates," "plans," 
"expects" and similar expressions are intended to identify forward-looking 
statements. There are a number of important factors that could cause the 
Company's actual results to differ materially from those indicated by such 
forwarding-looking statements. These factors include, without limitation, 
those set forth below under the caption "Certain Factors That May Affect 
Future Results." 


                                       14
<PAGE> 


Results of Operations 



   The following table sets forth, for the periods indicated, certain 
financial data as a percentage of revenue for the years ended December 31, 
1994, 1995 and 1996. 


<TABLE>
<CAPTION>
                                                      Year Ended December 31, 
                                                    ---------------------------- 
                                                     1994      1995      1996 
                                                    --------  ----------------- 
<S>                                                 <C>       <C>     <C>
Revenue                                              100.0%    100.0%   100.0% 
Costs and expenses: 
 Operating expenses                                   26.0      25.8     25.7 
 General, administrative and selling expenses         38.1      42.5     39.1 
 Depreciation and amortization                         6.4       5.9      6.3 
 Systems development and programming costs            12.0      10.9     12.6 
                                                    --------  ----------------- 
Total costs and expenses                              82.5      85.1     83.7 
                                                    --------  ----------------- 
Operating income                                      17.5      14.9     16.3 
Other income                                           0.5       0.4      1.9 
Interest expense                                      (6.2)     (4.2)    (2.5) 
                                                    --------  ----------------- 
Income before income tax expense and extraordinary 
  item                                                11.8      11.1     15.7 
Income tax expense                                     0.6       3.5      6.7 
                                                    --------  ----------------- 
Income before extraordinary item                      11.2       7.6      9.0 
Extraordinary loss                                      --      (2.0)      -- 
                                                    --------  ----------------- 
Net income                                            11.2%      5.6%     9.0% 
                                                    ========  ================= 
</TABLE>


Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 



  Revenue 
   Revenue increased 54.2% from $10,820,815 in 1995 to $16,689,401 in 1996, 
due primarily to the addition of new customers and the continued growth of 
recurring revenue from existing customers. 



  Operating expenses 
   Operating expenses increased 53.7% from $2,787,687 in 1995 to $4,283,364 
in 1996, due primarily to the addition of new personnel required to support 
the growth of the Company's business. As a percentage of revenue, such 
expenses decreased slightly from 25.8% in 1995 to 25.7% in 1996. 



  General, administrative and selling expenses 
   General, administrative and selling expenses increased 41.8% from 
$4,601,242 in 1995 to $6,522,900 in 1996. This increase was primarily due to 
one time charges of $1,206,548, related to compensation paid to two newly 
hired employees ($909,548), a lawsuit settlement ($97,000) and a payment to 
Connecticut Innovations, Incorporated ("CII") ($200,000) (See Note 3 of the 
Notes to the Financial Statements). Other changes from 1995 to 1996 relate to 
increased employee compensation benefits of $606,535, additional rent expense 
of $260,815 and other administrative expenses resulting from the growth of 
the Company. These expenses were partially offset by decreases in salaries 
and bonuses paid to senior management of approximately $413,086. As a 
percentage of revenue, general, administrative and selling expenses decreased 
from 42.5% in 1995 to 39.1% in 1996. 



  Depreciation and amortization 
   Depreciation and amortization increased 64.4% from $640,917 in 1995 to 
$1,053,472 in 1996 primarily due to the purchase of computer equipment and 
the increased spending on the enhancement of the Company's ITDS 10X system to 
support Unix based file servers and further development of its integrated 
billing and management information system. Depreciation and amortization 
expenses increased as a percentage of revenue from 5.9% in 1995 to 6.3% in 
1996. 



  Systems development and programming costs 
   Systems development and programming costs increased 78.8% from $1,183,141 
in 1995 to $2,115,305 in 1996, primarily due to increased programming support 
required by the Company's 


                                       15
<PAGE> 

customers. As a percentage of revenue, system development and programming 
costs increased from 10.9% in 1995 to 12.6% in 1996. In addition, the Company 
capitalized $479,316 and $858,827 in software development costs, in 1995 and 
1996, respectively. 


  Interest expense 
   Interest expense decreased 8.1% from $452,925 in 1995 to $416,148 in 1996, 
as a result of lower overall debt balances in 1996 as compared to 1995. This 
was partially offset by an increase in capitalized lease obligations in 1996. 



  Income tax expense 
   The Company's effective tax rate increased from 31.5% in 1995 to 42.5% in 
1996 due primarily to debt consolidation expense benefits in 1995 which did 
not recur in 1996. 



Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 



  Revenue 
   Revenue increased 71.1% from $6,324,041 in 1994, to $10,820,815 in 1995, 
due primarily to the addition of new customers and the continued growth of 
recurring revenue from existing customers. 



  Operating expenses 
   Operating expenses increased 69.3% from $1,646,852 in 1994, to $2,787,687 
in 1995, due primarily to the addition of new personnel required to support 
the growth of the Company's business. As a percentage of revenue, such 
expenses decreased slightly from 26.0% in 1994, to 25.8% in 1995. 



  General, administrative and selling expenses 
   General, administrative and selling expenses increased 91.0% from 
$2,409,683 in 1994, to $4,601,242 in 1995. As a percentage of revenue, 
general, administrative and selling expenses increased from 38.1% in 1994 to 
42.5% in 1995. This increase was due primarily to increases in executive 
officers salaries, bonuses and other benefits of $1,263,600, general office 
expenses of $368,300, employee compensation and benefits, including 
employment agency fees and relocation costs, of $324,600, advertising 
expenses of $65,000 and other administrative expenses as a result of the 
growth of the Company. 



  Depreciation and amortization 
   Depreciation and amortization increased 57.9% from $405,873 in 1994, to 
$640,917 in 1995 primarily due to the purchase of computer equipment and the 
increased spending on the enhancement of the Company's ITDS 10X system to 
support Unix based file servers and further development of its integrated 
billing and management information system. Depreciation and amortization 
expenses decreased as a percentage of revenue from 6.4% in 1994 to 5.9% in 
1995 primarily due to the growth in revenue. 



  Systems development and programming costs 
   Systems development and programming costs increased 56.6% from $755,387 in 
1994, to $1,183,141 in 1995, primarily due to increased programming support 
required by a larger customer base. As a percentage of revenue, system 
development and programming costs decreased from 12.0% in 1994, to 10.9% in 
1995 primarily due to the growth in revenue. In addition, the Company 
capitalized $288,602 and $479,316 in software development costs in 1994 and 
1995, respectively. 



  Interest expense 
   Interest expense increased 16.2% from $389,793 in 1994, to $452,925 in 
1995, primarily due to the increase in capital leases for computer equipment 
required by the Company. 



  Income tax expense 
   The Company's effective tax rate was 31.5% in 1995 and 4.9% in 1994. The 
increase in the rate was primarily due to the fact that in 1994 the Company 
fully utilized its net operating loss carryforward credits for which 
valuation allowances had previously been recorded. 


                                       16
<PAGE> 


  Extraordinary loss 
   On June 30, 1995, the Company refinanced existing debt with CII and 
recorded an extraordinary loss of $223,696, net of $158,038 in tax benefits. 
Such extraordinary loss was due to negotiated acceleration of payments in 
connection with the early termination of the debt agreement. 



Liquidity and Capital Resources 



   The Company has financed its operations to date primarily through its 
initial public offering in October 1996, private placements of debt and 
equity securities, cash generated from operations and equipment financing. 



   As of December 31, 1996, the Company had $4,138,575 of cash and cash 
equivalents, $25,023,454 in securities available for sale (United States 
Treasury Notes), $3,232,967 (including $1,396,412 for services provided prior 
to December 31, 1996 which were not billable at that time) in net trade 
accounts receivable, and $31,639,397 of working capital. 


   In the twelve months ended December 31, 1996, the Company generated 
$1,445,792 in net cash from operating activities and $29,345,172 in net cash 
from financing activities including the sale of shares of Common Stock in the 
Company's Initial Public Offering in October 1996 for $32,502,706 in net 
proceeds. The cash generated from operations and the net proceeds from the 
Initial Public Offering enabled the Company to fund its operations, apply 
$858,827 to product development costs, purchase $25,413,553 of investments, 
and make $2,173,496 in principal payments on long-term debt and capital lease 
obligations. 


   The Company maintains a bank line of credit with First Union Bank of 
Connecticut providing for borrowings of up to $250,000. To date, the Company 
has made no borrowings under this line of credit. In addition, the Company 
has a letter of credit with First Union in the amount of $362,000 as security 
for the Company's lease of its headquarters. The line of credit and the 
letter of credit are secured by substantially all of the assets of the 
Company. The line of credit expires in August 1997 and bears interest at the 
bank's prime lending rate and the letter of credit is renewable annually and 
is subject to an annual fee of 1%. 



   The Company believes that its existing capital resources as well as the 
letter of credit and credit facility described in Note 8 to the Financial 
Statements are adequate to meet its cash requirements for the foreseeable 
future. There can be no assurance, however, that changes in the Company's 
plans or other events affecting the Company's operations will not result in 
accelerated or unexpected expenditures. 



   The Company may seek additional funding through public or private 
financing. During 1997, the Company anticipates selling 500,000 shares of its 
Common Stock in a follow-on public offering. There can be no assurance, 
however, that additional financing will be available from any of these 
sources or will be available on terms acceptable to the Company. 



   To date, inflation has not had a significant impact on the Company's 
operations. 



Certain Factors That May Affect Future Results 



   The following important factors, among others, could cause actual results 
to differ materially from those indicated by forward-looking statements made 
in this Annual Report on Form 10-K and presented elsewhere by management from 
time to time. 



  Rapidly Changing Telecommunications Market 
   Over the last decade, the market for telecommunications services has been 
characterized by rapid technological developments, evolving industry 
standards, dramatic changes in the regulatory environment and frequent new 
product introductions. The Company's success will depend upon its ability to 
enhance its existing products and services, and to introduce new products and 
services which will respond to these market requirements as they evolve. To 
date, substantially all of the Company's revenues are attributable to 
wireless customers. While the Company believes that systems and services 
which it offers to address the needs of the wireless market will also permit 
it to attract customers in other 


                                       17
<PAGE> 


segments of the telecommunications services industry, there can be no 
assurance that it will be able to do so. In addition, technologies, services 
or standards may be developed which could require significant changes in the 
Company's business model, development of new products, or provision of 
additional services, at substantial cost to the Company. Such developments 
may also result in the introduction of additional competitors into the 
marketplace. 


  Management of Growth 
   The Company has experienced rapid growth and intends to continue to 
aggressively expand its operations. The Company's total revenues have 
increased from $3.1 million in 1993 to $16.7 million in 1996. The growth in 
the size and complexity of its business, as well as its customer base, has 
placed and is expected to continue to place significant demands on the 
Company's administrative, operational and financial personnel and systems. 
Additional expansion by the Company may further strain the Company's 
management, financial and other resources. The Company's future operating 
results will depend on the ability of its officers and key employees to 
manage changing business conditions and to implement and improve its 
operational, financial control and reporting functions. 


   The number of the Company's employees has increased from 26 as of January 
1993 to 188 as of February 1997. The Company anticipates that continued 
growth will require it to recruit and hire a substantial number of new 
development, managerial, finance, sales and marketing support personnel. 
There can be no assurance that the Company will be successful in hiring or 
retaining any of the foregoing personnel. The Company's ability to compete 
effectively and to manage future growth, if any, will depend on its ability 
to improve operational systems and to expand, train, motivate and manage its 
workforce. 



  New Products and Rapid Technological Change 
   The market for the Company's products and services is characterized by 
rapid technological change. The Company believes that its future success 
depends in part upon its ability to enhance its current products and services 
and develop new products and services that address the increasingly complex 
needs of its customers. In addition, the introduction of new products or 
services by third parties could render the Company's existing products and 
services obsolete or unmarketable. The Company's ability to anticipate 
changes in technology and successfully develop and introduce new or enhanced 
products incorporating such technology on a timely basis will be significant 
factors in its ability to remain competitive. 



  Dependence on Cellular Telephone Industry 
   Although the Company's products have been designed to adapt to a variety 
of current and future technologies, a significant majority of its revenues to 
date have been generated by sales of its systems and services to service 
providers in the cellular telephone industry. A decrease in the number of 
cellular service subscribers served by the Company's customers could result 
in lower revenues for the Company. Although the cellular market has 
experienced substantial growth in the number of subscribers in the past, 
there can be no assurance that such growth will be sustained. 



  Reliance On Significant Customers 
   For the year ended December 31, 1996, revenue from Aliant Communications 
Co. (formerly, The Lincoln Telephone and Telegraph Company) and its 
affiliated companies represented approximately 19.1% (reflects the 
acquisition of Nebraska Cellular by Aliant in 1996) of the Company's total 
revenue, and revenue from Horizon Cellular Group represented approximately 
12.5% of the Company's total revenue. The Company has long-term contracts 
with all of its significant customers, however there can be no assurance that 
any such customer will renew its contract with the Company at the end of the 
contract term or may not seek to terminate its contract on the basis of 
alleged contractual defaults or other grounds. Loss of all or a significant 
part of the business of any of the Company's substantial customers would have 
a material adverse effect on the Company's business, financial condition and 
results of operations. Additionally, the acquisition by a third party of one 
of the Company's substantial customers could result in the loss of that 
customer and have a material adverse effect on the business, financial 
condition and results of operations of the Company. Since October 1996, 
Horizon Cellular Group 


                                       18
<PAGE> 


has divested certain of its remaining cellular markets, the majority of which 
were acquired by existing customers of the Company. Because the majority of 
these markets were acquired by the Company's existing customers, the Company 
does not expect that the significant reduction in revenue from Horizon 
Cellular Group expected in 1997 will have a material adverse effect on the 
business, financial condition or results of operations of the Company. 



  Expansion of Sales Activities 
   In order to achieve significant long-term growth in revenues and its 
overall strategic goals, the Company intends to attract a number of larger 
telecommunications services providers as customers. In order to do so, and to 
expand its business generally, the Company believes that it must expand the 
sales and marketing organization. There can be no assurance that the Company 
will be able to achieve anticipated expansion of its business, attract larger 
telecommunications services providers as customers or build an efficient and 
effective sales and marketing organization. 



  Dependence on Key Personnel 
   The Company's performance depends substantially on the performance of its 
executive officers and key employees. The Company's long-term success will 
depend upon its ability to recruit, retain and motivate highly skilled 
personnel. Competition for such personnel is intense, and there can be no 
assurance that the Company will be able to attract, assimilate or retain 
highly skilled personnel in the future. 



  Competition 
   The market for billing and management information systems for the 
telecommunications services industry is highly competitive and the Company 
expects that the high level of growth within the telecommunications services 
industry will encourage new entrants, both domestically and internationally, 
in the future. The Company competes with independent providers of 
transactional systems and services, with the billing services of management 
consulting companies and with internal billing departments of 
telecommunications services providers. The Company anticipates continued 
growth in competition in the telecommunications services industry and 
consequently the entrance of new competitors into its market in the future. 
In addition, merger or consolidation of telecommunications services providers 
could result in the loss to the Company of customers or sales opportunities 
to competitors. 



  Dependence on Proprietary Technology 
   The Company's success is dependent in part upon its proprietary software 
technology. The Company relies on trademark, copyright and trade secret laws, 
employee and third-party non-disclosure agreements and other methods to 
protect its proprietary rights. There can be no assurance that its agreements 
with employees, consultants and others who participate in the development of 
its software will not be breached, that the Company will have adequate 
remedies for any breach, or that the Company's trade secrets will not 
otherwise become known to or independently developed by competitors. 
Furthermore, there can be no assurance that the Company's efforts to protect 
its rights through trademark and copyright laws will prevent the development 
and design by others of products or technology similar to or competitive with 
those developed by the Company. 


                                       19
<PAGE> 


Item 8--Financial Statements and Supplementary Data 



              International Telecommunication Data Systems, Inc. 



Index to Financial Statements 


<TABLE>
<CAPTION>
                                                                                      Page 
                                                                                    ------- 
<S>                                                                                 <C>
Report of Independent Auditors                                                         21 
Financial Statements 
Balance Sheets as of December 31, 1995 and 1996                                        22 
Statements of Income for the years ended December 31, 1994, 1995 and 1996              24 
Statements of Stockholders' Equity (Deficiency) for the years ended 
  December 31, 1994, 1995 and 1996                                                     25 
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996          26 
Notes to Financial Statements                                                          27 
</TABLE>

                                       20
<PAGE> 


                        Report of Independent Auditors 



Board of Directors and Stockholders 
International Telecommunication Data Systems, Inc. 


We have audited the accompanying balance sheets of International 
Telecommunication Data Systems, Inc. as of December 31, 1996 and 1995, and 
the related statements of income, stockholders' equity (deficiency) and cash 
flows for each of the three years in the period ended December 31, 1996. 
These financial statements are the responsibility of the Company's 
management. Our responsibility is to express an opinion on these financial 
statements based on our audits. 

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion. 


In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of International 
Telecommunication Data Systems, Inc. at December 31, 1996 and 1995, and the 
results of its operations and its cash flows for each of the three years in 
the period ended December 31, 1996, in conformity with generally accepted 
accounting principles. 


                                                     /s/ Ernest & Young LLP

Stamford, Connecticut 
February 11, 1997 

                                       21

<PAGE> 


              International Telecommunication Data Systems, Inc. 



                                 Balance Sheets


<TABLE>
<CAPTION>
                                                                     December 31, 
                                                               --------------------------- 
                                                                  1995          1996 
                                                              -------------  ------------- 
<S>                                                           <C>            <C>
                           Assets 
Current assets: 
Cash and cash equivalents                                      $1,172,692    $ 4,138,575 
Accounts receivable, net of allowance for doubtful accounts 
  of $52,370 in 1996                                            1,348,787      3,232,967 
Securities available for sale, at estimated market value 
  (Note 2)                                                             --     25,023,454 
Prepaid expenses and other current assets                         575,011      1,503,209 
Deferred income taxes                                              20,256         44,000 
                                                              -------------  ------------- 
    Total current assets                                        3,116,746     33,942,205 

Property and equipment: 
Computers, including leased property under capital leases of 
  $1,275,366 and $1,863,103, respectively                       1,642,697      2,986,056 
Furniture and fixtures, including leased property under 
  capital leases of $33,119 in 1995 and 1996                       90,015        446,535 
Trade booth                                                        37,809         98,854 
Equipment, including leased property under capital leases of 
  $20,882 and $53,508, respectively                                29,933        152,996 
Leasehold improvements                                             27,026        589,479 
                                                              -------------  ------------- 
                                                                1,827,480      4,273,920 
Less: accumulated depreciation and amortization                   709,911      1,328,228 
                                                              -------------  ------------- 
                                                                1,117,569      2,945,692 
Other assets: 
Product development costs--at cost, net of accumulated 
  amortization of $286,110 and $586,215, respectively             785,005      1,343,727 
Other                                                             185,563        165,913 
Deferred income taxes                                             228,823             -- 
                                                              -------------  ------------- 
                                                                1,199,391      1,509,640 
                                                              -------------  ------------- 
    Total assets                                               $5,433,706    $38,397,537 
                                                              =============  ============= 
</TABLE>
                           See accompanying notes. 

                                       22
<PAGE> 


              International Telecommunication Data Systems, Inc. 



                           Balance Sheets--Continued


<TABLE>
<CAPTION>
                                                                      December 31, 
                                                               ---------------------------- 
                                                                  1995           1996 
                                                              -------------  -------------- 
<S>                                                           <C>            <C>
            Liabilities and stockholders' equity 
Current liabilities: 
Accounts payable                                               $  256,001    $   685,739 
Accrued expenses                                                  386,137        765,713 
Accrued compensation                                              693,386        272,059 
Current portion of accrued rent liability                          26,401         41,059 
Current maturities of notes payable                                77,198             -- 
Current maturities of long-term debt (Note 3)                      69,240             -- 
Current maturities of capital lease obligations (Note 7)          398,261        538,238 
                                                              -------------  -------------- 
    Total current liabilities                                   1,906,624      2,302,808 
Accrued rent liability                                             53,293         70,639 
Long-term debt (Note 3)                                         1,742,033             -- 
Capital lease obligations (Note 7)                                695,028        878,432 
Deferred income taxes                                                  --        407,000 
Other                                                              17,694         21,240 
Commitments and contingencies (Note 8)                                 --             -- 
Redeemable Preferred Stock--Class C $4,961 par value, 
  cumulative, nonvoting 250 shares authorized, 129 shares 
  outstanding                                                     640,000             -- 
Stockholders' equity (Note 4) 
Preferred Stock--Class A (net of issuance costs) $25,000 par 
  value, noncumulative, nonvoting 50 shares authorized, 18 
  shares outstanding                                              400,400             -- 
Preferred Stock--Class B (net of issuance costs) $250 par 
  value, noncumulative, nonvoting 2,000 shares authorized, 
  1,500 shares outstanding                                        327,600             -- 
Preferred Stock, $.01 par value, 2,000,000 shares 
  authorized, none issued                                              --             -- 
Common Stock, $.01 par value; 40,000,000 shares authorized, 
  5,124,800 and 8,436,504 shares issued, 4,875,200 and 
  8,436,504 shares outstanding                                     51,248         84,365 
Additional paid-in capital                                             --     43,472,324 
Retained deficit                                                     (184)    (8,802,298) 
Treasury stock, 249,600 shares                                   (400,030)            -- 
Unrealized loss on securities available for sale                       --        (36,973) 
                                                              -------------  -------------- 
Total stockholders' equity                                        379,034     34,717,418 
                                                              -------------  -------------- 
Total liabilities and stockholders' equity                     $5,433,706    $38,397,537 
                                                              =============  ============== 
</TABLE>

                           See accompanying notes. 

                                       23
<PAGE> 


               International Telecommunication Data Systems, Inc.



                              Statements of Income


<TABLE>
<CAPTION>
                                                                Year ended December 31, 
                                                       ------------------------------------------- 
                                                           1994          1995           1996 
                                                      ------------- --------------  -------------- 
<S>                                                   <C>           <C>             <C>
Revenue                                                 $6,324,041    $10,820,815    $16,689,401 
Costs and expenses: 
 Operating expenses                                      1,646,852      2,787,687      4,283,364 
 General, administrative and selling expenses            2,409,683      4,601,242      6,522,900 
 Depreciation and amortization                             405,873        640,917      1,053,472 
 Systems development and programming costs                 755,387      1,183,141      2,115,305 
                                                      ------------- --------------  -------------- 
    Total costs and expenses                             5,217,795      9,212,987     13,975,041 
                                                      ------------- --------------  -------------- 
Operating income                                         1,106,246      1,607,828      2,714,360 
Other income                                                28,413         49,477        315,914 
Interest expense                                          (389,793)      (452,925)      (416,148) 
                                                      ------------- --------------  -------------- 
Income before income tax expense and extraordinary 
  item                                                     744,866      1,204,380      2,614,126 
Income tax expense                                          36,666        378,786      1,111,788 
                                                      ------------- --------------  -------------- 
Income before extraordinary item                           708,200        825,594      1,502,338 
Extraordinary loss (net of $158,038 tax benefit)                --       (223,696)            -- 
                                                      ------------- --------------  -------------- 
Net income                                              $  708,200    $   601,898    $ 1,502,338 
                                                      ============= ==============  ============== 
Pro forma income per common share: 
 Income before extraordinary item                                     $       .13    $        .23 
 Extraordinary loss                                                          (.03)            -- 
                                                                    --------------  -------------- 
Pro forma net income                                                  $       .10    $       .23 
                                                                    ==============  ============== 
Shares used in computing pro forma income per common 
  share                                                                 6,194,171      6,593,206 
                                                                    ==============  ============== 
</TABLE>

                           See accompanying notes. 

                                       24
<PAGE> 



              International Telecommunication Data Systems, Inc. 



                Statements of Stockholders' Equity (Deficiency)



<TABLE>
<CAPTION>
                                               Preferred Stock 
                                 ---------------------------------------------- 
                                       Class A                 Class B             Common Stock 
                                 ---------------------- ---------------------- 
                                   Number                 Number                  Number      $.01 
                                 of Shares    $25,000    of Shares     $250     of Shares     Par 
                                Outstanding  Par Value  Outstanding  Par Value Outstanding   Value 
                                ------------ --------- ------------  --------- ------------  ------- 
<S>                             <C>          <C>           <C>       <C>        <C>         <C>
Balance at December 31, 1993         18      $ 400,400     1,500     $ 327,600  5,091,200   $50,912 
Issuance of Common Stock                                                           33,600       336 
Net income 
Preferred Stock dividends 
  declared 
Purchase of treasury stock                                                       (249,600) 
                                ------------ --------- ------------  --------- ------------  ------- 
Balance at December 31, 1994         18        400,400     1,500       327,600  4,875,200    51,248 
Issuance of Preferred Stock 
Net income 
Preferred Stock dividends 
  declared 
                                ------------ --------- ------------  --------- ------------  ------- 
Balance at December 31, 1995         18        400,400     1,500       327,600  4,875,200    51,248 
Net income 
Preferred Stock dividends 
  declared 
Retirement of treasury stock                                                                 (2,496) 
Recapitalization of 
  Class A & B Preferred Stock       (18)      (400,400)   (1,500)     (327,600)   852,812     8,528 
Compensation paid in Common 
  Stock                                                                            70,768       708 
Conversion of Class C 
  convertible Preferred Stock                                                     103,200     1,032 
Exercise of warrants                                                              334,524     3,345 
Sale of Common Stock, net of 
  expenses                                                                      2,200,000    22,000 
Net unrealized loss on 
  securities available for sale 
                                ------------ --------- ------------  --------- ------------  ------- 
Balance at December 31, 1996         --      $    --          --     $    --    8,412,504   $84,365 
                                ============ ========= ============  ========= ============  ======= 
</TABLE>

<TABLE>
<CAPTION>
                                                                        Net 
                                                                    Unrealized 
                                                                      Loss on 
                                 Additional  Treasury    Retained   Securities 
                                  Paid-in    Stock at    Earnings    Available 
                                  Capital      Cost      (Deficit)   for Sale     Total 
                                ------------ --------- ------------  --------- ------------ 
<S>                             <C>          <C>       <C>           <C>       <C>
Balance at December 31, 1993    $    20,183  $   --    $ (1,301,800) $   --    $  (502,705) 
Issuance of Common Stock             30,429                                         30,765 
Net income                                                  708,200                708,200 
Preferred Stock dividends 
  declared                          (22,500)                                       (22,500) 
Purchase of treasury stock                   (400,030)                            (400,030) 
                                ------------ --------- ------------  --------- ------------ 
Balance at December 31, 1994         28,112  (400,030)     (593,600)       --     (186,270) 
Issuance of Preferred Stock 
Net income                                                  601,898                601,898 
Preferred Stock dividends 
  declared                          (28,112)                 (8,482)               (36,594) 
                                ------------ --------- ------------  --------- ------------ 
Balance at December 31, 1995             --  (400,030)         (184)       --      379,034 
Net income                                                1,502,338              1,502,338 
Preferred Stock dividends 
  declared                                                  (79,236)               (79,236) 
Retirement of treasury stock       (397,534)  400,030                                   -- 
Recapitalization of 
  Class A & B Preferred Stock    10,119,688             (10,225,216)              (825,000) 
Compensation paid in Common 
  Stock                             633,841                                        634,549 
Conversion of Class C 
  convertible Preferred Stock       638,968                                        640,000 
Exercise of warrants                819,614                                        822,959 
Sale of Common Stock, net of 
  expenses                       31,657,747                                     31,679,747 
Net unrealized loss on 
  securities available for sale                                       (36,973)     (36,973) 
                                ------------ --------- ------------  --------- ------------ 
Balance at December 31, 1996    $43,472,324  $   --    $ (8,802,298) $(36,973) $34,717,418 
                                ============ ========= ============  ========= ============ 
</TABLE>

                           See accompanying notes. 

                                       25
<PAGE> 


              International Telecommunication Data Systems, Inc. 



                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                   Year ended December 31, 
                                                          ------------------------------------------ 
                                                             1994          1995           1996 
                                                         ------------ -------------  --------------- 
<S>                                                      <C>          <C>            <C>
Operating activities 
Income before extraordinary loss                          $  708,200    $  825,594    $   1,502,338 
Adjustments to reconcile income before extraordinary 
  loss to net cash provided by operating activities: 
 Depreciation and amortization                               405,873       640,917       1,053,472 
 Compensation paid in Common Stock                            30,135            --         634,549 
 Deferred interest expense                                   342,032            --              -- 
 Loss (gain) on disposal of equipment                         14,705          (245)         10,009 
 Deferred income taxes                                            --       (93,960)        612,079 
 Change in operating assets and liabilities: 
  Accounts receivable                                       (429,785)     (457,609)     (1,884,180) 
  Prepaid expenses and other current assets                    8,300      (236,378)       (875,072) 
  Accounts payable and accrued expenses                       93,574       781,049         390,831 
  Other assets and liabilities, net                          (13,310)     (157,414)          1,766 
                                                         ------------ -------------  --------------- 
Net cash provided by operating activities                  1,159,724     1,301,954       1,445,792 
Investing activities 
Capital expenditures                                        (144,624)      (17,358)     (1,852,701) 
Proceeds from sale of equipment                                   --        13,500              -- 
Purchase of securities available for sale                         --            --     (25,060,427) 
Purchase of investments held to maturity                    (200,000)     (245,069)       (353,126) 
Proceeds from maturities of investments                      200,000        99,286         300,000 
Product development costs                                   (288,602)     (479,316)       (858,827) 
                                                         ------------ -------------  --------------- 
Net cash used for investing activities                      (433,226)     (628,957)    (27,825,081) 
Financing activities 
Principal payments on long-term debt                        (292,668)     (276,507)     (1,811,273) 
Payment to retire Preferred Stock                                 --            --        (825,000) 
Principal payments on notes payable                          (18,672)      (76,001)        (76,958) 
Principal payments on capital lease obligations              (98,590)     (166,297)       (362,223) 
Proceeds from sale of Common Stock                               630            --      32,502,706 
Proceeds from sale of Preferred Stock                             --       640,000              -- 
Dividends paid                                               (22,500)      (33,750)        (82,080) 
Purchase of treasury stock                                  (240,000)           --              -- 
                                                         ------------ -------------  --------------- 
Net cash provided by (used for) financing activities        (671,800)       87,445      29,345,172 
Net increase in cash and cash equivalents                     54,698       760,442       2,965,883 
Cash and cash equivalents at beginning of year               357,552       412,250       1,172,692 
                                                         ------------ -------------  --------------- 
Cash and cash equivalents at end of year                  $  412,250    $1,172,692    $  4,138,575 
                                                         ============ =============  =============== 
Supplemental disclosures of cash flow information: 
Cash paid during the year for interest                    $  335,731    $  447,241    $    434,092 
Cash paid during the year for taxes                       $  481,700    $  419,700    $    819,897 
</TABLE>

Supplemental disclosure of noncash financing activities: 
Capital lease obligations totaling $234,512, $960,059 and $685,604 in the
years ended December 31, 1994, 1995 and 1996, respectively, were incurred for
the acquisition of new equipment. In 1994, notes payable totaling $175,000 with
a present value of $160,030 were issued when the Company repurchased Common
Stock.

                           See accompanying notes. 

                                       26


<PAGE> 


               International Telecommunication Data Systems, Inc.
                          Notes to Financial Statements

1. Business and Significant Accounting Policies 
Description of Business 



   The Company provides comprehensive transactional billing and management 
information solutions to providers of wireless, long distance and satellite 
telecommunications services. These solutions are built upon a flexible 
proprietary software technology to address customer requirements as they 
evolve, regardless of market segment, geographic area or mix of network 
features or billing options. The Company typically provides its services to 
customers under exclusive contracts with terms ranging from three to four 
years, and bills customers monthly, typically on a per subscriber basis. As a 
result, substantially all of the Company's revenue is recurring in nature, 
and increases as a customer's subscriber base grows. 
Basis of Presentation 


   Property and equipment are carried at cost, less accumulated depreciation 
computed using the straight-line method over the estimated useful lives of 
the assets. 

   The Company acquired certain software, which is carried at cost, less 
accumulated amortization computed using the straight-line method based on an 
estimated life of five years. 


   The Company capitalizes software development costs incurred in the 
development of software used in its product and service line only after 
establishing commercial and technical viability and ceases when the product 
is available for general release. The capitalized costs include salaries and 
related payroll costs incurred in the development activities. Software 
development costs are carried at cost less accumulated amortization computed 
using the greater of the amount resulting from applying the ratio that 
current gross revenue for the product bears to total and anticipated future 
gross revenue for the product to capitalized costs or the straight-line 
method over the remaining estimated useful life of the product; generally, 
such deferred costs are amortized over five years. During the years ended 
December 31, 1994, 1995 and 1996, $90,682, $166,292 and $300,105, 
respectively, of capitalized software development costs were amortized. 



   Revenues and costs associated with the recurring process of providing 
billing and other service/ software solutions are recognized at the time 
services are performed. License fees and related costs are recognized upon 
execution of the licensing agreement and delivery of the software to the 
customer, provided that the Company has no significant related obligations or 
collection uncertainties remaining. Where there are significant obligations 
related to the development and enhancement of the software, license fees are 
recorded over the expected installation period or the term of the respective 
contract. As of December 31, 1996, accounts receivable includes $118,000 
relating to a license agreement that is being recorded over the expected 
installation period that cannot be billed until the installation is 
completed, which is expected to occur during July 1997. In addition, accounts 
receivable at December 31, 1995 and 1996, include $439,433 and $1,278,412, 
respectively, for services rendered prior to December 31 which were billed in 
January of the following year when the billing cycles were complete. 


   In 1995, the FASB issued Statement of Financial Accounting Standards No. 
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived 
Assets to be Disposed Of." The Statement, which has been adopted in 1996, 
requires companies to investigate potential impairments of long-lived assets 
on an exception basis, when there is evidence that events or changes in 
circumstances have made recovery of an asset's carrying value unlikely. The 
adoption of Statement No. 121 has not had a material effect on the Company's 
financial position or results of operations. 


   Pro forma net income per share of Common Stock, is calculated using the 
weighted average number of shares of common stock outstanding and common 
stock equivalents, if dilutive, after giving effect to 


                                       27
<PAGE> 


              International Telecommunication Data Systems, Inc. 
                  Notes to Financial Statements--(Continued) 

1. Business and Significant Accounting Policies (Continued)


the retirement of the Company's Class A and B Preferred Stock, the issuance 
of 852,812 post-split shares of Common Stock to the holders of the Class A 
and B Preferred Stock, the conversion of the Series C Preferred Stock and the 
800-for-1 stock split referred to in Note 4. Common and common equivalent 
shares issued during the twelve month period prior to the initial public 
offering ("IPO") at prices below the IPO price are included in the 
calculations, using the treasury stock method, as if they were outstanding 
for all periods presented. There was no dilutive impact from stock options 
during the periods. 


Fully diluted EPS did not differ significantly from primary EPS for any 
period presented. 


Supplemental earnings per share, assuming, at the beginning of the respective 
periods, the exercise of the warrants, the redemption and conversion of all 
outstanding preferred stock, and the sale of common stock, the proceeds of 
which were used for debt retirement, are as follows: 


<TABLE>
<CAPTION>
                                        Year ended 
                                       December 31, 
                                       1995    1996 
                                      -------------- 
<S>                                   <C>    <C>
Income before extraordinary item      $ .17    $.24 
Extraordinary item                     (.04)     -- 
                                      -----    ---- 
Net income                            $ .13    $.24 
                                      =====    ==== 
</TABLE>


Cash Equivalents 



   The Company considers all highly liquid debt instruments with a maturity 
of three months or less when purchased to be cash equivalents. 
Use of Estimates 



   The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the amounts and disclosures reported in the financial 
statements and accompanying notes. Actual results could differ from those 
estimates. 

Reclassifications 



   Certain reclassifications were made to conform prior years' data to the 
current presentation. 
Major Customers 


   The Company markets its services through a core team of senior executives 
and is in the process of developing a direct sales force. 


   Three customers accounted for approximately 32.0%, 34.8% and 39.7% of the 
Company's total revenues in 1994, 1995 and 1996, respectively. The president 
and chief executive officer of one of these customers is a director of the 
Company. Revenues from this customer, whose cellular territories are being 
sold, many of which to existing ITDS customers, accounted for approximately 
9.4%, 15.2%, and 12.5% of the Company's total revenues in 1994, 1995 and 
1996, respectively. Credit losses have not been significant. 



2. Investments 



   Prepaid expenses and other current assets includes short-term investments 
of $295,069 and $348,195 as of December 31, 1995 and 1996, respectively. 
These investments are recorded at cost plus accrued interest (approximates 
market), which consist of United States Treasury Bills, maturing on or before 
April 3, 1997. These short-term investments are classified as held to 
maturity as the Company has the ability and intent to hold the investments to 
maturity. The income from these investments is included in other income. 


                                       28
<PAGE> 


              International Telecommunication Data Systems, Inc. 
                  Notes to Financial Statements--(Continued) 

2. Investments (Continued)


   Securities available for sale consist of United States Treasury Notes with 
a 6% coupon rate maturing on August 15, 1999. These securities are recorded 
at fair value, with the unrealized gains and losses, net of tax, reported in 
a separate component of shareholders' equity. The net unrealized loss as of 
December 31, 1996 was $36,973. The premium of approximately $64,000 paid for 
these investments is being amortized into income on the straight-line basis 
based on the maturity date. Amortization of the premium and accrued interest 
are included in other income. 



3. Debt 


   At December 31, 1994, the Company had an aggregate of $1,316,575 payable 
to Connecticut Innovations Incorporated ("CII") under certain debt agreements 
dated August 16, 1991 and July 21, 1992 with face amounts of $600,000 and 
$350,000, respectively. These loans required payment of principal and 
interest which were calculated based on revenues for the period multiplied by 
a specified percentage rate. These loans were structured such that they would 
be considered paid in full based upon the aggregate payments (principal and 
interest) at specified dates. Based on the estimated payments, the imputed 
interest rate approximated 25% at December 31, 1994. On June 30, 1995, the 
Company consolidated these loans with CII into one loan with a principal 
amount of $1,485,000 at a 14.5% interest rate. 

   The Company also had a loan payable to CII, originally issued in 1993 for 
$350,000 at a 10% interest rate, which was refinanced in December 1994 with a 
$389,472, 10% interest bearing note. This note included principal plus 
accrued interest on the original loan. The new note was payable in equal 
monthly installments over 60 months and had a balance of $326,273 at December 
31, 1995. 

   In addition, pursuant to the August 16, 1991 debt agreement, as amended, 
between the Company and CII, the Company was obligated to make a one-time 
payment to CII of $200,000 upon (i) the closing of an initial public 
offering, (ii) the sale of the Company through merger, sale of assets or 
otherwise or (iii) the exclusive or semi-exclusive licensing agreement for 
the sale of any product of the Company. This one-time payment was charged to 
1996 operations. 

   With the net proceeds from the IPO, the Company retired substantially all 
long-term debt and a portion of its capital lease obligations. 

   In 1994, the Company issued notes payable of $175,000 with no stated 
interest. Interest of 9% has been imputed on these notes. Certain of these 
notes are guaranteed by certain officers and stockholders of the Company. The 
notes were paid in full in 1996. 


4. Capital Stock 


   The Company completed its IPO in October 1996. The Company sold 2 million 
shares at an initial public offering price of $16 per share, resulting in 
proceeds to the Company of approximately $28.7 million, after deducting 
expenses. In addition, on November 18, 1996 the Company received 
approximately $3.0 million, net of expenses, upon the exercise of the 
underwriters' over-allotment option to purchase 200,000 shares of Common 
Stock. 

   In connection with the IPO, the Company's Certificate of Incorporation was 
amended to authorize the issuance of up to 40,000,000 shares of Common Stock, 
$.01 par value per share and the issuance of up to 2,000,000 shares of 
Preferred Stock, $.01 par value per share. Pursuant to a recapitalization the 
Company was reincorporated in the State of Delaware and an 800-for-1 split of 
its Common Stock was effected. 


   A portion of the proceeds from the Company's IPO were used to retire 
substantially all of the Company's outstanding debt. In addition, the 
Company's Class A and B Preferred Stock was retired and 


                                       29
<PAGE> 


              International Telecommunication Data Systems, Inc. 
                  Notes to Financial Statements--(Continued) 

4. Capital Stock (Continued)


the holders of such shares were issued an aggregate of 852,812 post-split 
shares of the Company's Common Stock and were paid an aggregate amount of 
$825,000. The distribution of the 852,812 shares of the Company's Common 
Stock, valued at $12 per share, for an aggregate of $10.2 million, resulted 
in a one-time, noncash charge to retained earnings and a corresponding 
increase to additional paid- in-capital. Further, immediately prior to the 
IPO, CII exercised outstanding warrants to purchase 334,524 post-split shares 
of the Company's Common Stock at an aggregate purchase price of $822,959. In 
addition, upon the closing of the IPO all of the outstanding shares of Series 
C Preferred Stock of the Company (all of which were held by CII) converted 
into an aggregate of 103,200 post-split shares of Common Stock. The Company 
retired all shares held in treasury immediately prior to its IPO. 


Each share of Class A Preferred Stock was entitled to a noncumulative 
dividend equal to 10% of the Class A par value, and a priority return on its 
par value, plus .5% of any proceeds generated from a liquidating 
distribution, or .5% of the then outstanding common stock (exclusive of 
shares issuable upon exercise of certain warrants) immediately prior to a 
public offering. 


Each 100 shares of Class B Preferred Stock was entitled to a noncumulative 
dividend equal to 10% of the Class B par value, and a priority return on its 
par value, plus .375% of any proceeds generated from a liquidating 
distribution, or .375% of the then outstanding common stock (exclusive of 
shares issuable upon exercise of certain warrants) immediately prior to a 
public offering. The Class B shares were subordinate to the shares of Class A 
Preferred Stock with respect to dividends, capital transactions and 
liquidating distributions. 


The Class C Preferred Stock was junior to the Class A and B Preferred Stock 
with regard to liquidation and dividend preference, was entitled to an 8% 
cumulative dividend and was convertible into ITDS Common Stock at any time at 
the option of the holder on a 800-for-one basis. The stock could have been 
put to the Company upon the occurrence of certain events at a price to have 
been determined at the put date as defined in the agreement. In addition, the 
holders of the Class C Preferred Stock could have demanded registration of 
the stock in certain circumstances. 


5. Stock Option Plan 


   The Company's 1996 Stock Incentive Plan authorizes the grant of options to 
employees, directors and consultants of the Company for up to 1,000,000 
shares of the Company's Common Stock. Generally, options granted have 10 year 
terms and vest and become fully exercisable at the end of 4 years of 
continued employment. In addition, a total of 200,000 common shares have been 
authorized for issuance under the Company's 1996 Employee Stock Purchase 
Plan. 


   A summary of the Company's activity in the stock option plans and related 
information for the year ended December 31 follows: 
<TABLE>
<CAPTION>
                                                                            Weighted- 
                                                                             Average 
                                                               Options   Exercise Price 
                                                               --------- --------------- 
<S>                                                            <C>       <C>
Outstanding--December 31, 1995                                       --          -- 
Granted                                                         393,700      $ 13.94 
Exercised                                                            --          -- 
Forfeited                                                         1,500       14.00 
                                                               --------- 
Outstanding--December 31, 1996                                  392,200       13.94 
                                                               ========= 
Exercisable at December 31, 1996                                 16,062       18.36 
                                                               ========= 
Weighted-average fair value of options granted during the 
  year                                                         $    7.29 
</TABLE>


                                       30
<PAGE> 


               International Telecommunication Data Systems, Inc.
                   Notes to Financial Statements--(Continued)

5. Stock Option Plan (Continued)


   Exercise prices for options outstanding as of December 31, 1996 ranged 
from $12 to $21. The weighted average remaining contractual life of those 
options is 9.75 years. 


   The Company has elected to follow Accounting Principles Board Opinion No. 
25, "Accounting for Stock Issued to Employees" (APB 25) and related 
Interpretations in accounting for its employee stock options because, as 
discussed below, the alternative fair value accounting provided for under 
FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires 
use of option valuation models that were not developed for use in valuing 
employee stock options. Under APB 25, because the exercise price of the 
Company's employee stock options equals the market price of the underlying 
stock on the date of grant, no compensation expense is recognized. 

   Pro forma information regarding net income and earnings per share is 
required by Statement 123, and has been determined as if the Company had 
accounted for its employee stock options under the fair value method of the 
Statement. The fair value for these options was estimated at the date of 
grant using a Black-Scholes option pricing model with the following 
assumptions for 1996: risk-free interest rates of 5%; no dividend yield; a 
volatility factor of the expected market price of the Company's Common Stock 
of 0.71; and a weighted-average expected life of 5 years. 

   The Black-Scholes option valuation model was developed for use in 
estimating the fair value of traded options which have no vesting 
restrictions and are fully transferable. In addition, option valuation models 
require the input of highly subjective assumptions including the expected 
stock price volatility. Because the Company's employee stock options have 
characteristics significantly different from those of traded options, and 
because changes in the subjective input assumptions can materially affect the 
fair value estimate, in management's opinion, the existing models do not 
necessarily provide a reliable single measure of the fair value of its 
employee stock options. 


   For purposes of pro forma disclosures, the estimated fair value of the 
options is amortized to expense over the options' vesting period. The 
Company's pro forma information for the year ended December 31 follows: 


<TABLE>
<CAPTION>
                                     1996 
                                  ----------
<S>                               <C>
Pro forma net income              $1,189,597
                                  ==========
Pro forma earnings per share      $      .18
                                  ==========
</TABLE>


   These pro forma effects may not be representative of the effects on future 
years because of the prospective application required by Statement No. 123, 
and the fact that options vest over several years and new grants may be made 
each year. 


   Under the employee stock purchase plan, shares of the Company's Common 
Stock may be purchased at six-month intervals at 85% of the lower of the fair 
market value on the first or the last business day of each six-month period. 
Employees may purchase shares having a value not exceeding 10% of their gross 
compensation, up to $25,000 of the fair market value of such Common Stock, 
during an offering period. 


6. Deferred Compensation 



   The Company had a deferred compensation plan for certain nonshareholder 
key employees. The deferred compensation is based upon the award of 
performance units, the value of which is related to the financial performance 
of the Company. The performance units vest incrementally over a ten year 
period from the date of grant or vest 100% upon a public offering. At 
December 31, 1995, unvested 


                                       31
<PAGE> 


              International Telecommunication Data Systems, Inc. 
                  Notes to Financial Statements--(Continued) 

6. Deferred Compensation (Continued)


performance units with an aggregate value of $51,150 were outstanding. These 
were paid in full as a result of the IPO of the Company's Common Stock. 


In accordance with the terms of an employment agreement, as amended on 
September 30, 1996, an employee received a payment of $275,000 in 1996 and, 
as a result of the public offering of the Company's Common Stock, the right 
to purchase 18,333 shares of the Company's Common Stock for $.01 per share. 
In addition, during 1996 an employee was given the right to purchase 28,435 
shares of the Company's Common Stock for $.01 per share. During 1996, these 
employees acquired the shares and the difference between the exercise price 
and the fair value on the date of grant was charged to compensation expense. 

In connection with an employment agreement entered into during 1996, an 
employee was awarded 24,000 shares of the Company's Common Stock with a fair 
value of $336,000 when awarded. The shares become vested 25% on April 1, 
1997, and an additional 25% becomes vested on October 31 of each of 1998, 
1999 and 2000, provided that vesting will accelerate upon the sale of the 
Company. The fair value of the shares on the date of award is being amortized 
over the vesting period. 


7. Capitalized Lease Obligations 


   The Company leases computer equipment and office furniture under capital 
leases expiring in various years through 2000. The assets and liabilities 
under capital leases are recorded at the lower of the present value of the 
minimum lease payments or the fair value of the asset. Depreciation of assets 
under capital leases is included in depreciation expense. 

   Maturities of capital lease obligations are as follows as of December 31, 
1996: 

<TABLE>
<CAPTION>
<S>                                          <C>
 1997                                         $  684,864 
1998                                             496,628 
1999                                             260,527 
2000                                             169,326 
                                             ------------ 
Total lease obligations                        1,611,345 
Less: amount representing interest               194,675 
                                             ------------ 
Present value of minimum lease payments       $1,416,670 
                                             ============ 
</TABLE>


8. Commitments and Contingencies 


   On June 11, 1996, the Company entered into a noncancelable lease expiring 
on August 31, 2000 for 48,222 square feet of office space in Stamford, 
Connecticut. In connection therewith, the Company obtained a letter of credit 
in the initial amount of $362,000 as security for the lease. The letter of 
credit is renewable annually and is subject to an annual fee of 1%. Minimum 
future rental payments due under such lease are $723,330 per year. In 
addition, the Company obtained a $250,000 credit facility. The credit 
facility expires on August 31, 1997 and bears interest at the bank's prime 
lending rate. The letter of credit and credit facility is secured by 
substantially all of the assets of the Company. 


   The Company also leases Connecticut office facilities, which have been 
sublet, under a noncancelable operating lease expiring in April 1999. The 
Company recognizes rental expense on a straight line basis over the term of 
the lease. 



   Rent expense was $221,225, $330,914 and $591,729 for the years ended 
December 31, 1994, 1995 and 1996, respectively. 


                                       32
<PAGE> 


              International Telecommunication Data Systems, Inc. 
                  Notes to Financial Statements--(Continued) 

8. Commitments and Contingencies (Continued)

Minimum future rental payments due under such leases as of December 31, 
1996 are as follows: 

<TABLE>
<CAPTION>
<S>                       <C>
 1997                     $  922,958 
1998                         922,958 
1999                         773,237 
2000                         482,220 
                          ------------ 
                           3,101,373 
Less: sublease income       (423,453) 
                          ------------ 
                          $2,677,920 
                          ============ 
</TABLE>


   The Company is also obligated to pay utilities and property taxes above 
the landlords' base year costs. 


   The Company has entered into employment contracts with various officers 
and other employees. The contracts expire in one to four years and require 
the Company to pay base compensation of $435,200 during 1997 plus ordinary 
bonuses and other benefits. 

   The Company maintains an employee savings plan that qualifies as a cash or 
deferred salary arrangement under Section 401(k) of the Internal Revenue 
Code. Under the plan, participating employees may defer up to 15% of their 
pre-tax compensation, but not more than $9,500 per calendar year. The Company 
does not contribute to the plan. 

   The Company is not party to any material legal proceedings. 


9. Extraordinary Item 


   As described in Note 3, on June 30, 1995 the Company refinanced existing 
debt with CII. In doing so, the Company recorded an extraordinary loss of 
$223,696 which is net of a $158,038 tax benefit. Such extraordinary loss was 
due to a negotiated acceleration of payments due to early termination of the 
debt agreement. 


10. Income Taxes 



   Significant components of income tax expense (benefit) before 
extraordinary item are as follows: 


<TABLE>
<CAPTION>
                          Year ended December 31, 
                    ----------------------------------- 
                       1994       1995         1996 
                     --------------------  ------------ 
<S>                 <C>         <C>         <C>
Current: 
 Federal             $28,828    $344,360    $  334,029 
 State                 7,838     128,386       118,333 
                     -------    --------    ---------- 
                      36,666     472,746       452,362 
                     -------    --------    ---------- 
Deferred: 
 Federal                  --     (62,640)      484,036 
 State                    --     (31,320)      175,390 
                     -------    ---------   ---------- 
                          --     (93,960)      659,426 
                     -------    ---------   ---------- 
Total tax expense    $36,666    $378,786    $1,111,788 
                     =======    =========   ========== 
</TABLE>
                                       33
<PAGE> 


               International Telecommunication Data Systems, Inc.
                   Notes to Financial Statements--(Continued)

10. Income Taxes (Continued)

   A reconciliation of the applicable federal statutory rate to the Company's 
effective tax (benefit) rate from income before income tax expense and 
extraordinary item follows: 

<TABLE>
<CAPTION>
                                                             1994      1995     1996 
                                                           --------  -------- -------- 
<S>                                                        <C>       <C>      <C>
Statutory rate                                               34.0%     34.0%    34.0% 
State income taxes, net of federal income tax benefit         0.7       5.3      7.4 
Debt consolidation expenses                                    --     (10.1)      -- 
Net operating loss carryforwards                            (41.9)       --       -- 
Alternative minimum tax                                       2.5        --       -- 
Nondeductible interest expense                                6.4        --       -- 
Other, net                                                    3.2       2.3      1.1 
                                                           --------  -------- -------- 
                                                              4.9%     31.5%    42.5% 
                                                           ========  ======== ======== 
</TABLE>


   Significant components of the Company's deferred tax assets and 
liabilities are as follows: 



<TABLE>
<CAPTION>
                                            December 31 
                                     ------------------------- 
                                        1995          1996 
                                     -----------  ------------- 
<S>                                  <C>          <C>
Deferred tax liabilities: 
 Software development costs           $443,709     $  798,862 
 Capitalized leases                    173,026        382,521 
                                     -----------  ------------- 
Total deferred tax liabilities         616,735      1,181,383 
                                     -----------  ------------- 
Deferred tax assets: 
 Deferred charges                       33,013         46,092 
 Depreciation and amortization         323,010        719,748 
 Accrued compensation                   26,408         26,937 
 Reserve for doubtful accounts              --         21,521 
 Interest                              483,383          4,085 
Total deferred tax assets              865,814        818,383 
                                     -----------  ------------- 
Net deferred tax asset (liability)    $249,079     $  (363,000) 
                                     ===========  ============= 
</TABLE>


11. Quarterly Results of Operations (Unaudited) 



   The following is a tabulation of the unaudited quarterly results of 
operations for the two years ended December 31, 1996 (in thousands, except 
per-share data): 


<TABLE>
<CAPTION>
                                                Three Months Ended 
                                    ------------------------------------------- 
                                    3/31/96    6/30/96    9/30/96    12/31/96 
                                    ---------  --------- --------- ----------- 
<S>                                 <C>        <C>       <C>       <C>
Revenue                              $3,934     $3,931    $4,139      $4,685 
Operating income (loss)               1,054        877      (273)      1,056 
Net income (loss)                       549        445      (240)        748 
Pro forma net income (loss) per 
  share                                 .09        .07      (.04)        .10 
</TABLE>

                                       34
<PAGE> 

               International Telecommunication Data Systems, Inc.
                   Notes to Financial Statements--(Continued)

<TABLE>
<CAPTION>

11. Quarterly Results of Operations (Unaudited) (Continued)

                                               Three Months Ended 
                                   ------------------------------------------- 
                                   3/31/95    6/30/95    9/30/95    12/31/95 
                                   --------- ---------  --------- ----------- 
<S>                                <C>       <C>        <C>       <C>
Revenue                             $2,179    $2,707     $2,958      $2,977 
Operating income                       336       558        400         314 
Income before extraordinary item       150       317        231         128 
Net income                             150        93        231         128 
Pro forma income before 
  extraordinary item per share         .02       .05        .04         .02 
Pro forma net income per share         .02       .02        .04         .02 
</TABLE>


   The sum of the quarters' net income per share may not equal the full year 
per-share amounts due to rounding differences resulting from changes in the 
number of common shares outstanding. 


   During the third quarter of 1996, the Company incurred a one-time charge 
for compensation related to two newly hired employees of $909,548 or $.09 per 
share. The fourth quarter of 1996 includes a one- time charge associated with 
the IPO of $200,000 or $.01 per share. 


12. Subsequent Events 



   During 1997, the Company anticipates selling up to 500,000 shares of its 
Common Stock in a follow- on public offering. 


                                       35
<PAGE> 

Item 9--Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosure 

   Not applicable. 

                                   PART III 

Item 10--Directors and Officers of the Registrant 


   The response to this item is contained in part under the caption 
"Executive Officers of the Company" in Part I of this Annual Report on Form 
10-K and in part in the Company's proxy statement for the annual meeting of 
stockholders to be held on April 8, 1997 (the "1997 Proxy Statement") in the 
section entitled "Election of Directors," which section is incorporated 
herein by reference. 



   In addition, in January 1997, David L. Wells resigned as Executive Vice 
President, Chief Information Officer and Director of the Company. 



Item 11--Executive Compensation 

   The response to this item is contained in the 1997 Proxy Statement in the 
section entitled "Election of Directors--Director Compensation" and 
"--Compensation of Executive Officers" which sections are incorporated herein 
by reference. 

Item 12--Security Ownership of Certain Beneficial Owners and Management 


   The response to this item is contained in the 1997 Proxy Statement in the 
section entitled "Security Ownership of Certain Beneficial Owners and 
Management," which section is incorporated herein by reference. 



Item 13--Certain Relationships and Related Transactions 

   The response to this item is contained in the 1997 Proxy Statement in the 
section entitled "Election of Directors--Certain Transactions," which section 
is incorporated herein by reference. 

                                   PART IV 

Item 14--Exhibits, Financial Statement Schedules, and Reports on Form 8-K 

   (a) Documents filed as a part of this Report on Form 10-K: 

    1. The following documents are included as part of this Annual Report on 
       Form 10-K: 
       Report of Independent Auditors 
       Balance Sheets as of December 31, 1995 and 1996 
       Statements of Income for the years ended December 31, 1994, 1995 and 
       1996 
       Statements of Stockholders' Equity (Deficiency) for the years ended 
       December 31, 1994,   1995 and 1996 
       Statements of Cash Flows for the years ended December 31, 1994, 1995 
       and 1996 
       Notes to the Financial Statements 

   2. Financial Statement Schedules 

   All schedules have been omitted because they are not required or because 
the required information is given in the Financial Statements or Notes 
thereto. 

                                       36
<PAGE> 

   3. Exhibits 

   The exhibits filed as part of this Annual Report on Form 10-K are as 
follows: 

<TABLE>
<CAPTION>
 EXHIBIT     DESCRIPTION 
NUMBER 
<S>          <C>
*3.1         Certificate of Incorporation of the Registrant, as amended. 
*3.2         By-Laws of the Registrant. 
*10.1        Form of 1996 Equity Incentive Plan. 
*10.2        1996 Employee Stock Purchase Plan. 
*10.3        Employment Agreement between the Registrant and Barry K. Lewis. 
*10.4        Stock Purchase Agreement dated December 11, 1995, as amended, between the Registrant and Connecticut 
             Innovations, Incorporated relating to Class C Convertible Preferred Stock. 
*10.5        Form of Lease between the Company and 969 Associates, dated December 1990. 
*10.6        Sublease dated June 11, 1996 between the Registrant and Learning International, relating to 225 High 
             Ridge Road, Stamford, Connecticut. 
21           Subsidiaries of the Registrant. 
23           Consent of Ernst & Young LLP. 
27           Financial Data Schedule. 
</TABLE>

* Incorporated by reference to the Registrant's Registration Statement on 
  Form S-1 (File No. 333-11045), as amended, originally filed with the 
  Securities and Exchange Commission on August 29, 1996. 

   (b) Reports on Form 8-K 

   No Reports on Form 8-K were filed during the last quarter of the Company's 
fiscal year ended December 31, 1996. 

                                       37
<PAGE> 


                                  SIGNATURES 


   Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized. 

                                                 INTERNATIONAL TELECOMMUNICATION
                                                 DATA SYSTEMS, INC.


                                                 /s/ Charles L. Bakes
                                                 ----------------------------
                                                 Charles L. Bakes
                                                 President


   Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the dates indicated. 

<TABLE>
<CAPTION>
          Signature                          Title                          Date 
 ---------------------------- ----------------------------------- ----------------------- 
 <S>                         <C>                                  <C>
    /s/ Charles L. Bakes     President, Chief Executive           February 27, 1997 
   -----------------------   Officer and Director                                   
       Charles L. Bakes      (Principal Executive Officer)        
                             
     /s/ Mark D. Spitzer     Chief Financial Officer              February 27, 1997
   -----------------------   (Principal Financial and                              
        Mark D. Spitzer      Accounting Officer)                                   
                             and Director                         
                              
     /s/ Lewis D. Bakes      Director                             February 27, 1997 
   -----------------------   
        Lewis D. Bakes       

     /s/ Stuart L. Bell      Director                             February 27, 1997 
   -----------------------
        Stuart L. Bell       

   /s/ Michael E. Kalogris   Director                             February 27, 1997 
   -----------------------
      Michael E. Kalogris    
</TABLE>

                                       38